Reducing the Barrier of High Land Cost:
Strategies for Facilitating More Affordable Rental
Housing Construction in Metro Vancouver
Phase 2 of The Transit-Oriented Affordable Housing Study
March 2019
Prepared for:
Metro Vancouver
By:
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Table of Contents
Part 1: Background, Objectives, and Scope ................................................................. 1
1.1 Introduction ........................................................................................................................... 1
1.2 Objectives ............................................................................................................................. 3
1.3 Other Approaches Not Explored in this Report ................................................................ 3
1.4 Structure of this Report ....................................................................................................... 6
1.5 Terminology .......................................................................................................................... 7
1.6 Professional Disclaimer ....................................................................................................... 9
Part 2: Current Situation ............................................................................................... 10
2.1 How Did We Get Here?....................................................................................................... 10
2.2 A Review of the Financial Challenges Faced by Rental Housing ................................. 12
2.3 What Can be Done? What is Being Done? ...................................................................... 17
2.3.1 What Can Local Governments Do About Rental Housing? ................................. 17
2.3.2 What are Local and Regional Agencies Doing? .................................................. 20
2.4 Federal and Provincial Governments ............................................................................... 22
2.5 Two Case Studies: Seattle and Los Angeles .................................................................. 22
Seattle Region ..................................................................................................... 23
Los Angeles Region ............................................................................................. 25
2.6 Other Research ................................................................................................................... 28
2.7 Perspectives of Housing Developers in Metro Vancouver ............................................ 29
Perspectives of Local Private Developers ........................................................... 29
Perspectives of Non Profit Housing Developers .................................................. 30
Similarities and Differences ................................................................................. 31
Part 3: Strategies to Address Land Availability and High Land Cost for Rental
Housing ............................................................................................................... 32
3.1 Acquiring and Deploying Land for Affordable Rental Housing ..................................... 32
3.1.1 Deployment of Lands Already Owned by Local and Regional Government
Entities ................................................................................................................. 33
3.1.2 Creative Acquisition by Local and Regional Entities ........................................... 35
3.1.3 Deployment of Lands Already Owned by Non-Profits ......................................... 37
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3.2 Using Rezoning to Achieve Affordable Rental Housing Supply ................................... 37
3.3 Zoning for Residential Rental Tenure .............................................................................. 44
3.3.1 Burnaby Metrotown .............................................................................................. 46
3.3.2 Surrey City Centre ............................................................................................... 48
3.3.3 Maple Ridge ......................................................................................................... 49
3.3.4 Implications for Rental Tenure Zoning ................................................................. 49
3.4 Inclusionary Affordable Housing Requirements ............................................................. 50
3.5 Evaluation of the Tools and Applicability in Metro Vancouver ..................................... 52
Part 4: Improving Unit Delivery .................................................................................... 55
4.1 Should private developer obligations for rental housing be met on site or could they
be met via cash-in-lieu or by delivering the units in other locations? ......................... 55
4.2 Should affordable units developed by the private sector, pursuant to rezoning
requirements, be owned by government or non-profits? Are there advantages or
disadvantages to ownership by the private sector? ...................................................... 56
4.3 What are the advantages and disadvantages of combining affordable rental units
with market rental units or strata units in the same project? ........................................ 57
4.4 Is there value in considering a more coordinated or centralized approach to public
and non-profit sector housing delivery, instead of the decentralized system currently
in place? .............................................................................................................................. 58
Part 5: Integrated Planning for Transit and Affordable Housing ............................... 61
Part 6: Conclusions and Recommendations .............................................................. 64
Appendix 1: Average Apartment Rents in Metro Vancouver, 2018 ........................... 68
Appendix 2: Calculations of Break Even Rent for New Apartments Under Different
Scenarios for Private Vs Non-Profit, Financing Structure Type ..................... 70
Appendix 3: Explanation of Cap Rates and Implications for New Private Sector
Rental Construction ........................................................................................... 73
Appendix 4: Metro Vancouver Local Government Measures to Encourage or
Facilitate Rental Housing ................................................................................... 74
Appendix 5, 6, and 7: Financial Analysis for Case Study Sites ................................. 76
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Part 1: Background, Objectives, and Scope
1.1 Introduction
Housing affordability is one of Metro Vancouver’s most challenging regional issues, straining households
financially and emotionally, pushing some young people out of the region, making it harder for some
employers to fill positions, pressuring all levels of government to do more.
Because of the severity of the problem, all levels of government are taking action and looking for new
solutions. The Federal Government is investing more money in housing. The Province is investing more
money and also introducing new forms of zoning, changes to property taxation, and changes to rent
regulations. Local governments are using their planning and zoning powers to enable more residential
construction, facilitate new affordable rental housing, and reduce demolitions of existing rental housing stock.
However, these efforts have not materially changed the picture for renters.
Addressing the affordability of rental housing is particularly challenging. Demand for rental housing is
increasing, in part because of population and household growth and in part because many households have
been priced out of the ownership market. New rental unit construction has not been sufficient to meet the
need for more units, so vacancy remains extremely low and rents have been increasing faster than household
income.
Over the last decade, after accounting for demolitions, the region’s total stock of purpose-built apartments
has increased by less than 5%. While more rental units have been created in new secondary suites and strata
units that enter the rental market, these tend to command higher rents than purpose-built rental units. As a
result, Metro Vancouver estimates that there will be a shortfall in the region of about 27,000 affordable rental
units by about 2028.
The situation could get worse:
• Continued population growth and continued lack of affordable ownership options will add to the demand
pressure on the rental market.
• Efforts to curb rent increases in existing older rental stock will help current renters but can risk diminishing
the private sector’s interest in developing new product.
• Construction costs continue to rise.
• The existing rental stock continues to age; about 15% of all rental units in the region were built before
1960 so many of these are in lower density buildings that will become physically obsolete over the next
couple of decades.
These trends suggest that affordable housing for renters will remain a significant problem unless there is a
much larger response from governments, non-profits, and the private development industry.
To explore possible solutions to the affordable rental housing challenge, in 2017 Metro Vancouver entered
into a partnership with BC Housing, BC Non Profit Housing Association, TransLink, Vancity Credit Union, the
Urban Development Institute, the BC Ministry of Municipal Affairs and Housing, and CMHC to try to tackle
the challenge of affordable rental housing supply, especially in locations with good access to public transit.
This all-hands-on-deck response is indicative of the magnitude of the problem and the recognition by the
public, private, and non-profit sectors of the need for action. In the first phase of its work, this partnership
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commissioned an analysis1 to identify the major financial barriers that are impeding the creation of more rental
housing, especially at transit-oriented locations, and to suggest some general approaches to deal with the
challenge.
That study concluded that the high cost of land, high construction costs, and financing costs are all part of
the financial challenge that private sector and non-profit housing developers face in building new rental units.
The study noted, though, that even if construction costs can be lowered and more favourable financing (or
grants) are available, the challenge would remain that it is difficult to obtain sites for new rental housing
because land values are so high. This land value problem exists because strata title residential prices, single
detached housing prices, and commercial property values have all reached levels in this region that are too
high to be affordable for new rental housing development. If rental developers (private sector and non-profit
alike) cannot compete in the urban marketplace (in which most land is in private ownership) to acquire
development sites, they can’t deliver more units.
Since the 2017 Phase One work, land values and construction costs have increased, making the challenge
even greater. Rents have continued to rise and vacancy is still extremely low.
So, in the second phase of the work on affordable rental housing, Metro Vancouver and its partners are
focusing on ways to reduce or eliminate land cost and land availability as barriers to new rental housing
supply. This is the primary subject of this report.
This report mainly focuses on affordable, transit-oriented rental housing, because:
• rental is inherently more affordable than ownership.
• low to middle income households, who are more likely to be renters, are having the hardest time in this
market.
• low to middle income households have the highest tendency to be transit users.
There is no lack of awareness of the importance and severity of the affordable housing challenge in Metro
Vancouver. The topic dominates political discourse, the news, social media, and government agendas. It
affects everyone, even those who don’t have their own affordability challenge. It will become harder to fill a
wide range of important jobs including jobs in the service sector, technology, teaching, health care,
emergency services, and others that the regional economy relies on if people have increasing difficulty finding
adequate housing and they move away.
Consequently, there are many new initiatives underway in the region to stimulate more rental housing
creation. This report is intended to support those efforts, by providing suggestions that could lead to the
construction of many more affordable rental units at a much quicker pace than is happening now.
1 “Analysis of the Financial Viability of New Purpose-Built Rental Housing at Transit-Oriented Locations in Metro Vancouver”,
Coriolis Consulting Corp., August 2017).
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1.2 Objectives
The primary objective of this work is to identify workable, financially viable tools to reduce the barrier of high
land cost and limited land availability that is impeding the construction of new, affordable, purpose-built rental
housing, particularly at transit-oriented locations.
This report explores four main strategies for increasing the availability of land for new affordable rental supply:
1. Using lands already owned by non-profits, local governments, and senior governments for affordable
housing, and finding creative ways to add to this inventory of land.
2. Using the rezoning process and associated tools to create new development entitlements (i.e. additional
density) that are either exchanged for affordable housing contributions or only available if they are used
to accommodate affordable housing. Density bonusing for affordable housing and Community Amenity
Contributions (CACs) are in this category.
3. Using the recently approved (in BC) rental residential zoning tool available to municipalities. The aim
behind this new kind of zoning is to reduce the market competition for land by removing (for some sites
or parts of some sites) strata residential as a possible use.
4. Establishing inclusionary requirements for affordable housing units in new multifamily residential
development projects. This approach imposes a requirement on developers of new market projects
(rental or strata) to provide some units that are affordable for households at defined income levels. This
adds a cost to projects, which can impact financial performance and which may affect whether projects
proceed, but it is a way of adding to rental stock that does not require the acquisition of land specifically
for affordable rental housing.
These approaches can be used in combination. It is common, for example, to combine an inclusionary
housing requirement with new density, so that the value of the new density offsets the costs of providing
affordable units.
The report examines how these strategies might work, explores the market, financial, and operational
advantages and disadvantages of each, and indicates whether these might be used to stimulate more
affordable rental housing construction in Metro Vancouver.
This report also has two secondary objectives:
• Suggest ways to improve the actual delivery of affordable rental units, either by the non-profit and public
sector or the private sector. Reducing the land cost barrier is a crucial part of the solution, but there are
other steps that could be taken to expand and accelerate the delivery of new units.
• Suggest ways to improve the integration of affordable housing planning with transit planning, because
increasing affordable housing at transit-served locations is the main goal of this work.
1.3 Other Approaches Not Explored in this Report
This report concentrates on finding ways to reduce the constraints of land availability and land price that have
limited the pace of new rental construction.
There are other, very different ways to address the problem of insufficient affordable rental accommodation.
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Distribution of Wealth and Income
It could be argued that the housing problem is really an income problem; the solution is to redistribute wealth
so that all households can afford housing. However, in much of Metro Vancouver even new rental
development at full market rents faces financial challenges, especially due to high land cost. Canada is a
long way off from income redistribution on a scale sufficient to solve the housing affordability problem for all
income groups in Metro Vancouver, so this report does not focus on income-based solutions to housing
affordability. This report focuses on creating new rental supply.
Publicly Owned Rental Housing
Another possible solution is a much greater direct investment in rental housing by governments.
Such an investment program might focus on extensive land acquisition, to then make sites available to rental
housing developers at affordable cost. This is one of the approaches explored in this report, to a point. While
“acquire land and make it available at affordable price” sounds simple enough, the price of land in this region
is such that it would take enormous capital investment to rely solely on buying enough land at market value
to accommodate all the needed rental housing.
Metro Vancouver estimates that the region requires a total of about 6,000 new rental units every year,
including social housing, non-market, affordable, and market rental. For illustrative purposes, if rental housing
should be distributed throughout the region (not just in the lowest land value areas) and if average land values
are equivalent to $100 per buildable square foot of strata apartment residential space (probably a low
estimate), then 6,000 rental units requires a capital investment in land of around $450 million2 per year,
every year for the foreseeable future in Metro Vancouver. Depending on construction cost and on how rents
were set, this investment might be recovered over the long term, but it still requires enormous cash or
borrowing to build such a large portfolio.
If investment in affordable rental means buying land and building the housing, then the total investment is
much greater. If construction costs average say $450 per square foot, then 6,000 units per year requires
about $2 billion3 per year in construction investment in Metro Vancouver, in addition to the land estimate
above.
So, land and construction for all the rental housing needed in this region will require about $2.5 billion per
year. Again, depending on how rents are set, this could be recovered over the long term but it still requires
massive borrowing or outlay of cash.
Government housing investment approaching this scale may well be an important part of the long-term
solution if housing prices in Metro Vancouver continue over the long term to rise faster than incomes. There
are communities in the world (Vienna is often cited as an example) in which government owns large shares
of total housing stock for this reason. On a small scale, this has happened locally such as in Whistler where
there is a special subset of housing stock that is only for employees and that is priced based on local
employment income not global demand for resort property. However, transferring this idea to the regional
scale may mean that the magnitude of the required capital investment is beyond the ability or willingness of
government to pay. If so, then it becomes necessary to assume that for the foreseeable future the private
sector and the non-profit sector must continue to provide a significant share of new rental housing
2 Assuming average unit size of 750 square feet per unit, the land cost estimate is 6,000 units x 750 sq ft per unit x $100 per sq
ft buildable for land = $450 million.
3 6,000 units x 750 sq ft per unit x $450 per sq ft = $2.025 billion.
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construction. This requires that these players must find it possible to obtain development sites at a cost that
is financially viable for them4.
This report is predicated on the following assumptions about the acquisition of land and the development of
new rental stock:
1. While governments have the ability to acquire additional lands and make them available for affordable
rental housing, this ability is limited by their available financial resources. It is important to consider
creative ways to acquire lands (or create development capacity) for affordable rental housing that do not
require paying full market value for land.
2. Governments and non-profits are able to deploy lands they already own for affordable rental housing
(assuming such lands are not required for other uses or for revenue generation) without necessarily
receiving full market value for their land or receiving a market rate of investment return on their lands.
These lands are not “free” because they have value that could be put to other uses, but they do not
require a new cash outlay or new borrowing.
3. While governments will continue to invest in housing, for the foreseeable future they are not likely to meet
the entire requirement for rental housing in this region. The private sector and the non-profit sector will
continue to be important players in the delivery of new rental housing supply in Metro Vancouver.
These assumptions do not mean that acquiring a much bigger portfolio of public lands (and housing) is a bad
idea; in fact, it is a good idea and is probably necessary in the long run. However, from a practical standpoint
this will only happen gradually so in the meantime other approaches that do not rely solely on public sector
cash and borrowing are needed.
Tax Incentives
There are several ways in which taxation can be structured to provide incentives for affordable housing,
including:
• Income tax treatment of rental housing. For example, previous incentives such as accelerated
depreciation allowances, capital gains exemptions, and the ability to deduct losses from other sources of
income could be reinstated. However, while these tax incentives would likely lead to more housing
construction, there would be a tax cost to the Federal and Provincial governments. This may be part of
the reason why they have not acted to replace the incentives that were eliminated in the 1970s.
• Property tax reductions, such as Revitalization Tax Exemptions that are available to local governments
in B.C.
• Rebates of GST, PST, or PTT for affordable rental housing.
Tax incentives would aid the creation of new rental supply, but the region cannot count solely on possible tax
incentives for private rental housing investment to solve the problem. Even if such changes were made, new
rental projects still must be able to find sites at affordable cost.
Convert Vacant Units to Rental Units and Restrict Short Term Rentals
Another approach to moderating rents is to convert vacant units to rental stock and to reduce parts of the
demand for rental housing.
4 Recognizing that financial viability is measured differently for non-profit and private sector housing developers, they each
nonetheless need projects to meet their respective tests for viability.
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The City of Vancouver and the Province have introduced taxes intended to shift vacant, owned units into the
rental pool. The total number of units that might be achieved is relatively small, though, compared to the total
need for new units in the region in the future.
As for the demand side, in the ownership market new purchase taxes applied to non-local buyers and new
property taxes on certain types of property are intended to bring down the price of owned housing. Housing
prices have started falling in response to these measures and the introduction of new mortgage qualification
stress-test rules, but in the rental market there is less room to moderate demand because most rental housing
demand comes from local residents who need housing. One of the few ways to reduce demand on rental
stock is to curtail short-term rentals (e.g. Airbnb), and local governments are already working on this. But the
limited room to moderate demand reinforces the need for more supply to maintain rental affordability.
Reduced Construction Costs
Another important strategy is to reduce the creation cost of new rental supply. This report concentrates on
reducing land cost (and increasing land availability), but local governments can also help by reducing parking
requirements and reducing or waiving fees such as DCCs or DCLs. These are important and are noted where
applicable in this report. It should be remembered, though, that while some cost reductions such as reduced
parking do not have offsetting negative consequences, reducing development fees for rental housing means
the cost of infrastructure must be recovered by other means. Municipalities can also reduce project cost by
reducing approvals time (which would reduce holding costs and financing charges) and reducing approvals
risk by clearly designating areas where rezoning and redevelopment are desirable and almost certain to be
approved when applications are consistent with policy.
Focus on Supply
The focus of this report, therefore, is on increasing supply as the primary means of addressing the challenge
of affordable rental housing. The most effective long term solution is to reduce the barriers that limit new
rental construction, principally by increasing the availability of land or density for rental units.
1.4 Structure of this Report
This report has six main parts:
1. Part 1 explains the purpose and scope of this work.
2. Part 2 provides broad background about rental housing, including the financial challenges, how the
current situation developed, and what kinds of actions are being taken in the region and elsewhere, all
as context for identifying ways to make progress. This background highlights the importance of creating
ways to accommodate more rental in a marketplace where land is too expensive for new rental to be
sustainable.
3. Part 3 examines in detail several ways to overcome the barrier of high land value (acquiring and deploying
public and non-profit lands; using the rezoning process to achieve affordable housing benefits; rental
residential zoning; and inclusionary housing requirements). This part describes these tools, uses market
and financial indicators to show the advantages, disadvantages, and effects of using these tools; and
suggests how they could be best incorporated into a comprehensive rental housing strategy.
4. Part 4 explores ways to improve the delivery of new affordable rental units, either by the private sector or
by the non-profit sector. First, assuming that private sector development will continue to be a significant
source of new affordable units, because of requirements or incentives already embedded in municipal
development approvals processes, this section asks how best to achieve the delivery of housing benefits
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by private developers. Second, this section explores whether unit creation by the public and non-profit
sectors could be improved through a more coordinated approach rather than through the current mix of
Provincial, regional, municipal, and non-profit entities.
5. Part 5 provides suggestions for better integration of transit planning and affordable housing development.
Low to moderate income households are more likely to use transit, so it makes sense to find ways to
locate affordable housing in places with good transit service.
6. Part 6 summarizes the main conclusions and recommendations.
1.5 Terminology
Addressing the rental housing challenge is complex and involves senior governments, regional agencies,
municipalities, the non-profit development sector, and the development industry. These groups do not always
speak the same language or share the same views about how the world should work.
The terms below are frequently used in discussions about rental housing development, but don’t always mean
the same things to everyone. This document uses the following definitions:
“Affordable”: This is a relative term, as it invites the question “affordable for whom?”. Metro Vancouver is
focusing on affordable units for households with annual income in the range of $35,000 to $60,000, or about
50% to 80% of the median household income (from the 2016 Census) in the region, with affordable defined
as rents that are a maximum of 30% of income. Households with incomes below $35,000 are considered
very low income and are acknowledged to require non-market, public sector subsidized solutions.
Households above $60,000 are assumed to be within the moderate range and perhaps able to participate in
the rental market (although not without challenges). It is important to note that the household incomes of
renters are generally lower than homeowners. In 2016, renter median household income was $49,000
compared to the overall median of about $75,000.
“Community Amenity Contributions” are amenities, affordable housing, or other public benefits (including
cash in lieu) obtained by local governments when development projects are going through the rezoning
process. When rezoning increases density, it generates new land value. Zoning policy in Metro Vancouver
municipalities generally aims to allocate this gain in land value so that there is an incentive for land owners
to sell their lands into the development market, incentive for developers to seek rezoning to increase the
capacity for housing, and revenue for local governments to help fund the infrastructure and amenities needed
to meet the needs of, and address the impacts of, a growing community.
“Density Bonus” is a form of zoning in which a site has a defined base density that is achievable without
providing any amenities or public benefits and defined additional density which can be obtained if the
developer provides a prescribed package of public benefits, which might include on-site amenities, affordable
housing, or cash-in-lieu. Density bonusing is similar to Community Amenity Contributions, in that both involve
the exchange of density for public benefits, but density bonusing is prescribed in a bylaw whereas Community
Amenity Contributions are often negotiated.
“Inclusionary Housing Requirement” means a mandatory obligation for a project (usually residential) to
include specific amounts of housing at rents affordable to specific target groups, usually based on household
income. In BC, inclusionary housing requirements are sometimes set when developers seek rezoning and,
as part of an agreed-on package of public benefits, enter into a housing agreement that mandates that some
units meet an affordability objective and/or mandates that some units be family oriented (2 or 3 bedroom).
Municipalities in BC are allowed (as of 2018) to zone land to only allow rental residential tenure, but under
current legislation they do not have the authority to impose inclusionary affordable housing requirements via
zoning alone. However, Section 483 of the Local Government Act allows municipalities to enter into a housing
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agreement (with a developer) that governs the tenure of units, the form of units, the target market, and the
rents. Such housing agreements are entered into when a developer seeks rezoning and the municipality
wants to obtain affordable housing as part of the public benefits that are provided in exchange for the change
in use and/or increase in density. These agreements are registered on title.
“Land” refers to physical sites that can be acquired and redeveloped. In urban development contexts,
allowable density (i.e. the amount of floorspace that can be developed on a site) can also be thought of as
“land” because increased density increases the physical capacity to accommodate housing. Land value can
therefore mean the value of a site, but it can also refer to the value of additional density.
“Profit” means the net revenue that a developer intends to earn by completing a successful development
project. In a strata project, it would mean the amount that is left after paying for land and all construction costs
paid to others (e.g. contractors, consultants, municipal fees, financing). In a rental project, it could mean the
profit that a developer makes by creating a new rental housing project and then selling it to a long term
investor for more than the cost (land, construction). It is sometimes perceived that developers make “too
much” profit and that is why housing prices are high. For developers competing in the marketplace to buy
land and sell units, the market tends to impose a ceiling on achievable profit. A developer who expects to
make extraordinary profit will either have to charge too much for units (meaning people will presumably not
buy them if they can buy a similar unit for less) or will have to somehow acquire land, labour, or building
materials for less than what other developers are willing to pay. This seldom happens, so there tends to be a
limit on profit margin in a given market area. In Metro Vancouver, profit margin targets are generally about
13% of revenue or 15% of cost.
There is also a basement on profit margin imposed by the market. A developer who aims for a profit that is
too low has little cushion against an increase in cost or a downturn in sales price. A developer who aims for
a profit that is too low may find it hard to obtain financing from lenders, who could regard the project as being
too risky because the pro forma financial analysis has no resilience to absorb downside. It is also important
to keep in mind that large development projects do involve risk. If there is no profit, then private developers
will not do projects (they will presumably look for opportunities in other markets).
Non-profit developers can deliver housing without a profit, for three reasons. First, they typically build in
allowances for administrative and management fees; while these are less than a typical developer ’s profit,
they do generate revenue that allows the non-profit to operate. Second, non-profit developers can rely on
non-traditional sources of financing, such a philanthropy or government grants and loans. People working
for non-profits do not typically invest their own money as equity and do not risk becoming personally insolvent
if a project fails (although there are some not-for-profit developers who inject equity into social purpose real
estate development). Third, some non-profits do not pay income tax so the amount they need to pull out of a
project to make it work financially is less than a private developer needs.
“Return on Investment” means the income generated from investing capital in an income-producing asset
such as rental housing, usually expressed as an annual percentage of the capital amount. An investor buying
a rental housing project for $10 million and expecting a cash return of 5% would expect that the project would
yield $500,000 per year in net income after paying all operating costs. This rate of return takes into account
risk and the possible returns that can be made from other kinds of investments (e.g. bonds, stocks). Investors
in rental housing usually expect that over time their return on investment will have three components: the
portion that comes from continuation of the net income at the start, the portion that comes from the gradual
increase in net income assuming that rents will escalate faster than operating costs, and the portion that
would come if the asset can be sold in the future for more than the original purchase price.
“Risk” means the exposure to downside in a real estate project that can result in failing to achieve the target
profit or return on investment or result in a loss. The main sources of risk in rental housing development are
market risk (falling rents or increasing vacancy, although these are unlikely in Metro Vancouver at this time),
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cost risk (construction costs have been rising rapidly), approvals risk (uncertainty and costs associated with
the duration, complexity, requirements, and outcome of the approvals process), and regulatory risk (e.g. rent
controls, limits on being able to keep pace with market rents, and constraints on renovation).
1.6 Professional Disclaimer
This document may contain estimates and forecasts of future growth and urban development prospects,
estimates of the financial performance of possible future urban development projects, opinions regarding the
likelihood of approval of development projects, and recommendations regarding development strategy or
municipal policy. All such estimates, forecasts, opinions, and recommendations are based in part on forecasts
and assumptions regarding population change, economic growth, policy, market conditions, development
costs and other variables. The assumptions, estimates, forecasts, opinions, and recommendations are based
on interpreting past trends, gauging current conditions, and making judgments about the future. As with all
judgments concerning future trends and events, however, there is uncertainty and risk that conditions change
or unanticipated circumstances occur such that actual events turn out differently than as anticipated in this
document, which is intended to be used as a reasonable indicator of potential outcomes rather than as a
precise prediction of future events.
Nothing contained in this report, express or implied, shall confer rights or remedies upon, or create any
contractual relationship with, or cause of action in favour of, any third party relying upon this document.
In no event shall Coriolis Consulting Corp. or Wollenberg Munro Consulting Inc. be liable to Metro Vancouver
or any third party for any indirect, incidental, special, or consequential damages whatsoever, including lost
revenues or profits.
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Part 2: Current Situation
This part examines the current affordable rental landscape in Metro Vancouver and provides some different
perspectives on how to address the challenge.
This part of the report includes:
• A summary of what local governments in BC are able to do, based on current legislation, to improve the
rental housing situation.
• A summary of what local governments in Metro Vancouver are currently doing for rental housing,
including some brief descriptions of current local initiatives that illustrate some recent approaches.
• Two case studies from other jurisdictions - Seattle and Los Angeles - to illustrate what other communities
are doing to encourage affordable, transit-oriented rental housing. These two regions were chosen
because they have adopted new policies to encourage or require affordable rental and because they
have emphasized coordination between development planning and transit planning so that a large share
of new affordable housing is in transit-served locations.
• A summary of a review of some academic comparisons of approaches used to encourage rental housing,
especially inclusionary zoning.
• A summary of the results of conversations with local private sector and non-profit rental housing
developers about their perspectives on the challenge of building affordable rental in this region.
2.1 How Did We Get Here?
Wind the clock back ten to twenty years, and the rental market in this region was very different:
• During 2002 to 2007, there was not much difference between general inflation, growth in average wages,
and growth in rents. Starting in 2007, these curves started to diverge. Rents started to grow more quickly
than overall inflation and more quickly than household income.
• Vacancy rates in Metro Vancouver have fluctuated over the long term, generally between 1% and 2%
since 1990, but the last time vacancy was over 2% was 2009.
• Because the existing rental stock was younger and in better condition, and rent rates were not rising as
quickly, “renovictions” were less common.
What happened?
Building and Investing in Rental Housing Became Less Attractive
Private investment in new purpose-built housing became less attractive starting in the 1970s when Federal
tax treatment of rental property was revised, including reducing the rate that assets could be depreciated for
tax purposes and reducing the ability to use a rental property loss to offset other income. Effectively, tax
incentives for rental housing investment were diminished, which tended to reduce the amount of new rental
construction5.
In addition, a variety of Provincial and local policy and regulatory changes began to shift the regulatory
balance more toward renters than landlords, which also tended to reduce interest in investing in new purpose-
5 Two short-lived programs (the Assisted Rental Program of 1975 to 1978 and the Multiple Unit Rental Building program of the
late 1970s) provided grants and tax incentives resulting in a large amount of rental construction, but since 1981 there have not been similar incentives for private investment in new rental stock.
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built rental housing. Limits on rent increases in particular dissuaded some private sector investment in rental
housing.
Housing Demand Ballooned
The total demand for housing in this region has been increasing rapidly. Metro Vancouver has a very long
history of population and household growth, employment growth, and income growth that fueled housing
demand. These have continued to contribute to rising prices, but several other factors accelerated the market:
• Mortgage interest rates fell to historic lows for a long time, increasing purchasing power.
• Mortgage markets evolved in ways that made more funds available including longer amortization periods,
higher ratio loans, and more lenders in the mortgage industry.
• Baby boomers reached the age at which they began transferring wealth to the next generation, adding to
its housing purchasing power.
• Non-local investment in housing increased, as the region became part of a global real estate market.
This non-local demand without some form of intervention is almost unbounded; as rising income and
wealth in the rest of world grows and as capital is mobile (both legally and illegally), more and more
people look to safe and attractive places to invest in property. It has become popular to call this
“speculation”, in a pejorative tone, but it has been nothing more nor less than investment in an asset that
is viewed as safe and likely to appreciate in value. Reducing or redirecting (from owned housing to rental
housing investment, for example) this portion of housing demand should be part of a strategy to address
housing affordability, and such efforts have started.
The result of these growing sources of demand is that, despite downturns or price corrections every decade
or so, residential prices in the region over the long term have risen faster than inflation and faster than local
household incomes.
Demand for Strata Units Increased
Rising demand for ownership and reduced rates of rental construction have caused strata title unit
construction to become the dominant form of new multifamily development in this region. This has had major
consequences for the rental market. Rising strata unit prices have caused residential land values to escalate
rapidly; in most of Metro Vancouver, these land values are much higher than what a rental developer can
afford to pay, so rental developers have a hard time competing to acquire land. Also, while about 15% to 20%
of new strata units tend to end up in the rental pool, these units tend to rent for much more than purpose built
rental units, mainly because they are a higher end product, and they are not a secure stock of units as the
owners could take occupancy at any time.
Supply of Greenfield Development Sites Dwindled
The supply of greenfield development lands in the region (which is bounded by the sea, mountains, and the
US border and which has a large portion of the land base in agricultural use and open space) has gradually
been depleted so that new low density, suburban residential units have comprised a decreasing share of new
construction. Higher density housing, in urban nodes, accounts for an increasing share of new residential
construction. Most of this new construction involves strata titled units, in locations that are also the preferred
locations for higher density rental housing because of access to transit, schools, shopping, and jobs.
Approvals Processes are More Complex
Approvals processes have generally become more complex and time-consuming in the region. There are
various reasons for this, including: community concerns about redevelopment and densification (requiring
more consultation, longer time frames, and in some cases rejections); increased municipal involvement in
the design process to deal with urban design, architectural character, and neighbourhood “fit”; increased
municipal requirements such as sustainability measures and amenity contributions; and others. These factors
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add time and cost, which means that the flow of new housing to the market is constrained. Turning down the
supply tap in the face of strong demand leads directly to upward pressure on sales prices and rents.
The Result
Demand is growing, purpose-built rental supply is not keeping up, new rental housing is financially difficult for
non-profits and private developers alike, and rents are rising faster than household income.
2.2 A Review of the Financial Challenges Faced by Rental Housing
Even though rents are rising - which is hard for renters but ought to make new investment attractive - it is
difficult to make new rental construction “work” in financial terms under current market conditions in Metro
Vancouver.
This section provides a high level overview of the financial challenges using some generalized numbers that
illustrate the range of conditions across the region. It is important to understand the nature and severity of
these challenges, as they have implications for the kinds of actions that are needed to facilitate more rapid
construction of new rental.
To illustrate the financial challenge, Exhibits 1 and 2 show the relationships between incomes, affordable
rents, and the rent needed to make a new project viable.
Exhibit 1 combines three different kinds of information about the one bedroom unit rental market in the
Vancouver Census Metropolitan Area.
Exhibit 1: Financial Barriers to Affordable Rental Construction (One Bedroom Units)
The red horizontal lines show the range of average one bedroom purpose-built apartment rents for
municipalities in the CMA, as reported by CMHC for late 2018:
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• The lower red line (at $878 per month) corresponds to Maple Ridge. Other communities near this lower
end of the rental market include Delta ($931) and Surrey ($978). See Appendix 1 for full data on average
rents by municipality.
• The upper red line ($1749) is in the University Endowment Lands. The City of Vancouver, West
Vancouver, and North Vancouver (City and District) are in the upper end of the rental market, with
average rents in the $1300 to $1600 per month range.
• All the other communities are between these bookends; in broad terms, rents decline from west to east.
The green horizontal lines show the monthly rents that are affordable for households with various annual
incomes, using data from the 2016 Census. Affordable rent is calculated as 30% of annual income, divided
by 12 to yield monthly rent. The household incomes represented on the graph are:
• $35,000 (which is about 50% of the regional median). Incomes below this line are generally regarded as
very low income by Metro Vancouver.
• $60,000 (which is about 80% of the regional median). Household income between $35,000 and $60,000
range is considered low income by Metro Vancouver.
• $75,000, which is the median household income for the region. Note that the median household income
of renters is lower, at about $49,000.
• $90,000 (which is about 120% of the regional median). Household Income between $60,000 and $90,000
is considered moderate.
These first two components of the graph support some important conclusions about the regional rental market
(for one bedroom units):
• Households with incomes below $35,000 have difficulty finding any affordable rental accommodation in
most parts of the region. One bedroom units are not suitable for families with children, so they face even
greater challenges finding affordable homes.
• Households with incomes in the $35,000 to $60,000 range can afford average rents in all but the most
expensive markets, although with vacancy so low they will have trouble finding units.
• Households with incomes at or above the median of $75,000 can afford units almost anywhere, although
low vacancy is still a constraint.
The last component of the graph (the vertical bars) shows the calculated minimum average rent that is needed
to make new rental construction financially viable under a range of different scenarios. The detailed
assumptions for these calculations are shown in Appendix 2. The graph illustrates these scenarios:
• The blue bars represent private sector projects and the grey bars represent non-profit projects. The key
differences are that the private sector projects are assumed to require a developer profit (which is set at
15% of land and construction cost), whereas the non-profits are assumed to need a management fee
(which is assumed to be 5% of land and construction cost), and the private sector projects are assumed
to obtain financing at market rates while the non-profits are assumed to have access to favourable
financing (lower interest rate, longer amortization period). Reducing the financing rates even further would
lower the breakeven rates.
• The bars show calculations for concrete and wood frame construction scenarios.
• The bars also show different assumptions about the amount that is paid for land, including no land cost
and low, medium, and high cost (representing a range that includes most development sites in the region
but excludes very high value markets).
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The vertical bars indicate the break-even monthly average rent, where “break-even” means the rent covers
all operating costs and covers 100% of the cost to create the unit, assuming that either 100% of the cost is
borrowed or any equity earns the same interest that is paid on the mortgage. This is probably conservative,
in that most private investors would expect to make a return on equity that is higher than mortgage rates.
These vertical bars show the challenge with delivering new rental product:
• Private developers can deliver new concrete units affordable to households with $90,000 income, but
only if the land is free. As land cost rises, the break event rents are only affordable to high income
households. The situation is better for wood frame units, which cost less to build. The private sector can
deliver units aimed at households with just over $75,000 income if land is free.
• Non-profit developers can deliver concrete units affordable for households with $60,000 income but only
if the land is free. With wood frame construction, non-profits can deliver units aimed at households with
around $55,000 if land is free.
• It is not possible for the private sector or the non-profit sector to deliver financially viable units (under the
assumptions in these calculations) that are affordable for households with incomes below around $50,000
even with free land, without some way to offset or reduce cost. This is mainly because of the high cost of
construction. The only way to make these projects work in financial terms is to have some combination
of a significant reduction in construction cost (e.g. no parking, no DCCs), grants, financing at low rates,
or some other way to offset the cost. One way to offset the cost is to make additional strata density
available in exchange for affordable housing. Another way to offset the cost is to include a mix of higher
and lower rental units (i.e. a mix of household incomes). Using the example of a non-profit concrete one
bedroom unit with no land cost (the left-most grey bar in Exhibit 1), the breakeven average rent is around
$1,500 per month but the target rent for a household earning $50,000 would be $1,250. The average of
$1,500 could be achieved if 50% of the units are rented at $1,250 and 50% are rented at $1,750 (which
needs household income of $70,000).
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Exhibit 2 shows the same kinds of information, but for two bedroom units. The outcomes are similar.
Exhibit 2: Financial Barriers to Affordable Rental Construction (Two Bedroom Units)
These exhibits show the severity of the financial challenge. The exhibits also point the way to possible
solutions:
• Rental units aimed at households with very low incomes (under $35,000) require large financial
assistance, in the form of free land, reduced construction cost, favourable financing, and some additional
support such as grants, very low cost financing, or some other means to offset the cost.
• Rental units aimed at households with low incomes ($35,000 to $60,000) require assistance, including
free or very low cost land, reduced cost, and favourable financing, but the degree of grant funding, interest
rate reduction, or cost offset is less. Adding strata density or including a mix of lower and higher rents
can help achieve the required offset.
• Rental units aimed at households with the lower end of moderate incomes ($60,000 to $75,000) can work
with free or low cost land if the units are wood frame. For concrete units, some additional help is needed,
such as reduced construction cost.
• Even for units aimed at the upper end of moderate income ($75,000 to $90,000), land cost must be
minimized.
Reduced (or eliminated) land cost is part of the solution in all cases.
Exhibit 3 uses a different approach to show how big the gap is that must be closed.
Exhibit 3 starts with assumptions about the target rents to be achieved (based on different levels of household
income) and then shows the implications for the supportable construction cost of new units.
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Exhibit 3
Exhibit 3 only shows numbers for two bedroom units and only shows the numbers from the perspective of
non-profit housing developers, who are assumed to have access to favourable long term financing.
Household Income of $35,000
Looking at the column for $35,000 household income, the exhibit shows that the maximum construction cost
(assuming no land, a 5% fee rather than a developer profit, and favourable financing) is about $121 per
square foot. This is (in round numbers) $380 less than the cost of concrete and $300 less than the cost of
wood frame construction. These reductions are not achievable by measures such as eliminating parking or
DCCs. These required reductions mean that projects aimed at very low income households need a very large
injection of assistance. For illustrative purposes, if the mortgage rate is lowered to 1%, operating costs are
reduced by $2,000 per year (e.g. property tax reduction or subsidy), and construction cost is reduced by $100
per square foot (no parking, no DCC), the project would still need a capital grant of $100 to $150 per square
foot to breakeven. Clearly housing aimed at very low income households must be heavily subsidized by the
public sector.
Calculation of Maximum Capital Cost for Affordable 2BR Units
Assumptions: Target Income Group
Annual Income $ 35,000 $ 60,000 75,000$
Affordable Monthly Rent @ 30% of income $ 875 $ 1,500 $ 1,875
Less: Monthly Operating Cost if 6,200$ /year $ 517 $ 517 $ 517
Net Operating Income $ 358 $ 983 $ 1,358
Financing Terms:
Interest Rate
Nominal rate (%/year sa compounding) 3.0%
Effective rate per compounding period 1.5%
Equivalent Monthly rate 0.2484517%
Amortization Period
# Years 50
# Months 600
Payment as % of NOI 100%
Monthly Pmt Factor (for Principal = $1) -$0.0032084
Principal Factor (for Pmt = $1) $311.6785439
Calculation of Mortgage Supported by Income: Target Income Group
Annual Income 35,000$ 60,000$ 75,000$
Monthly Mortgage Payment: 358$ 983$ 1,358$
Supportable Mortgage 111,685$ 306,484$ 423,363$
Calculation of Maximum Costruction Cost for Affordable 2BR Unit:
Supportable Mortgage 111,685$ 306,484$ 423,363$
Less: NON-PROFIT Dev Fee @ 5% of Const Cost 5,318$ 14,594$ 20,160$
Costruction Cost After Dev Fee 106,366$ 291,889$ 403,203$
Less: Land Cost at -$ -$ -$
Maximum Total Construction Cost 106,366$ 291,889$ 403,203$
Net 2 BR Unit Size 750 SqFt
Net -to-Gross Ratio 85%
Gross 2 BR Unit Size 882 SqFt 882 882 882
Maximum Construction Cost/SqFt 121$ 331$ 457$
Current Construction Cost/SqFt - Concrete 500.00$
Current Construction Cost/SqFt - Frame 420.00$
Required Reduction in Cost or Available Cushion (i.e. for additional Land Cost or Dev Fee)
Concrete ($/SqFt) 379.45-$ 169.19-$ 43.04-$
Frame ($/SqFt) 299.45-$ 89.19-$ 36.96$
-$
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Household Income of $60,000
Looking at the $60,000 household income column in Exhibit 3, the concrete option is short by about $170
and wood frame is short by about $90 per square foot. Elimination of parking and waiving DCCs could cover
much of this shortfall. If the hard and soft cost of an underground parking stall is around $60,000 to $65,000
and if average gross unit size is say 800 square feet assuming a mix of mostly 1 and 2 bedroom units, then
eliminating the parking stall reduces cost by about $75 to $80 per square foot. DCCs vary around the region
but eliminating or reducing them for affordable housing could knock another $20 or so off the cost.
Household Income of $75,000
For household income of $75,000, concrete and frame projects are feasible (with some cost reduction for
concrete), but it must be remembered that no land cost has been included.
Implications for Assistance
These numbers lead to the same conclusions supported by Exhibits 1 and 2:
• Housing for very low income households needs a large injection of assistance, in addition to free land,
lower cost, and favourable financing.
• Housing for households in the $60,000 range is close to working in financial terms and can be viable for
non-profits who do not have to pay for land if there are cost reductions.
• Housing for households in the $75,000 range is financially workable if land is free.
Again, the evidence is compelling that the delivery of affordable rental housing requires (depending on the
income group being targeted) a combination of free land, favourable financing, cost reductions (e.g. parking
reduced and DCCs waived), and possibly some other assistance such as grants, mixing market and non-
market rental, or injecting CAC revenue to offset housing cost.
This is why Metro Vancouver and its study partners have placed high priority on finding ways to solve the
challenge of land availability. Even with other financial supports in place, it is not possible to create new rental
housing unless sites or density are made available so private sector and non-profit rental developers can
build units. This is not the whole problem, but it is one of the biggest obstacles to new rental construction.
2.3 What Can be Done? What is Being Done?
The rental housing situation is acute, but it did not get this way overnight. It has been clear for quite a while
that the pace of rental construction was too low, that vacancy was too low, and that rents were growing too
quickly. So, local governments, rental housing developers, and the Province have been trying various
approaches to create more affordable rental units.
The problem of insufficient rental construction is not unique to this region and other jurisdictions have been
taking action to spur the creation of more affordable units, especially in transit-oriented locations.
This section provides a survey of the current landscape as a foundation for how to make improvements.
2.3.1 What Can Local Governments Do About Rental Housing?
This is a high level summary of the array of tools that local governments can apply to create or facilitate more
rental housing.
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The short answer is that BC local governments have considerable power to take action, subject to their
available financial resources, their priorities, and local political considerations.
Municipal Authority
Municipal powers in BC flow mainly from the Local Government Act and the Community Charter.
Regarding rental housing, these two pieces of legislation enable municipalities to act in a variety of ways to
regulate development, make land available, support affordable rental developments, or construct and operate
rental housing.
Perhaps the most sweeping authority is created by Section 8 of the Community Charter, which states in 8.1
that “A municipality has the capacity, rights, powers and privileges of natural person of full capacity” and in
8.2 that “A municipality may provide any services that the council considers necessary or desirable and may
do this directly or through another public authority or another person or organization.”
These sections enable broad scope to fund housing, provide land for housing, own and operate housing, or
assist organizations in the development and operation of housing. Section 24 anticipates that a municipality
might dispose of land or improvements for less than market value, guarantee a loan, or partner with another
organization, although public notice is required and Section 25 states that a council “must not provide a grant,
benefit, advantage or other form of assistance to a business”.
The Charter also enables municipalities to provide property tax relief under various circumstances. For
example, Section 224 authorizes permissive exemptions for property taxes which could exempt land and
improvements owned by a non-profit organization, which could be used for affordable housing. Section 226
allows revitalization tax exemptions which could be used to reduce property taxes for up to 10 years for
various kinds of development, which could include rental housing even if owned by the private sector
(because revitalization tax exemptions are excluded from the general prohibition against providing assistance
to a business).
Zoning, DCCs and Affordable Housing
The Local Government Act contains zoning provisions that could be used to support rental housing. There
are three main ways in which the zoning authority allows local governments to take positive action to facilitate
affordable housing:
• The broadest power flows from Section 479, which enables municipalities to adopt zoning bylaws that
regulate land use, density, and other development parameters. Municipal Councils have complete
discretion as to whether to change the zoning on property, which means they have the ability to establish
conditions under which rezoning is, in their view, in the community’s best interest. This ability to set
conditions has been used by municipalities in BC to require developments that are undergoing rezoning
to provide public benefits in the form of Community Amenity Contributions, affordable housing (units or
cash paid into an affordable housing fund), heritage building conservation if applicable, and others. Local
governments in Metro Vancouver have made extensive use of this rezoning discretion to negotiate the
provision of rental housing as part of redevelopment projects. Affordable housing provided in this way
has been secured via housing agreements, covenants, phased development agreements, requirements
to transfer the ownership of affordable units to the municipality or a non-profit, or other means.
• Section 482 enables municipalities to use density bonusing as a way to obtain affordable housing or
public amenities. Density bonus bylaws establish a base density that is achievable without providing
public benefits and additional density that, at the developer’s option, can be achieved if a prescribed
affordable housing component (usually secured via a housing agreement) or other amenity contribution
is provided.
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• Section 481, adopted in 2018, gives municipalities a new zoning power to “…limit the form of tenure to
residential rental tenure within a zone or part of a zone…in which multi-family residential use is permitted”.
This limit could apply to an entire parcel or to a specified number, portion, or percentage of units in a
building.
The Local Government Act also allows municipalities to impose Development Cost Charges (DCCs) on new
development, to help fund growth-related community-wide infrastructure. With few exceptions, the allowable
infrastructure is limited to water, sewer, roads, drainage, and park acquisition. However, the Act does allow
municipalities to waive or reduce the DCC for not-for-profit rental housing and for-profit affordable rental
housing.
Municipal Borrowing
Municipalities can borrow funds for public purposes, including borrowing to construct affordable housing if
that is a municipal priority and if the municipality has the borrowing capacity (based on its calculated borrowing
limits and its other needs for capital spending).
Most municipalities borrow through the BC Municipal Finance Authority, so they benefit from low borrowing
rates because of the strength of the Province’s credit rating.
Tax Increment Financing (TIF) is sometimes suggested as a borrowing mechanism that could be used to
fund affordable housing. In TIF, the property tax increases in a defined area (typically an area in which
property values are expected to increase due to public infrastructure investment) are dedicated to paying
back a loan or a bond issue. This vehicle can be useful if a lender or bond holder wants assurance that a
defined portion of municipal tax revenue is allocated to repayment regardless of other municipal financial
circumstances. However, it is important to note that TIF is simply one way of securing debt payments. It does
not produce tax revenue that would not otherwise exist, so it is not a means of creating “new” money for
affordable housing (or any other civic purpose). Alberta’s provision for a municipal Community Revitalization
Levy is a rare form of TIF that does yield “new” money, but only because in designated CRL areas the
Province of Alberta gives its share of increased property taxes to the municipality.
Summary
Based on the Community Charter and the Local Government Act, local governments can:
• Acquire land and make it available for less than market value for affordable housing provided by a non-
profit entity.
• Invest in the creation of affordable rental housing or partner with organizations for the creation of
affordable housing.
• Use their zoning powers to achieve affordable rental housing in redevelopment projects that involve
rezoning.
• Use their “rental” zoning power to try to make it easier for rental housing developers to obtain sites.
• Reduce or eliminate development fees for rental housing.
• Alter development regulations to reduce construction cost (e.g. reduce parking requirements).
• Reduce property taxes for rental housing.
• Increase the pace of project approvals to help increase the pace of new unit construction.
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• Plan areas for densification and redevelopment to create more capacity for multifamily residential
development in suitable locations such as areas well-served with transit.
2.3.2 What are Local and Regional Agencies Doing?
Local governments and regional agencies are already using a wide variety of approaches to address housing
affordability.
Metro Vancouver provides technical analysis and assistance to local government, provides regional land use
planning policy, works to coordinate land use planning with regional transportation planning, and makes some
sites available for affordable housing (although it does not own much land).
The Metro Vancouver Housing Corporation is a non-profit entity that owns and operates homes for more than
9,000 people in 49 properties around the region. These units are rented at below-market rates, in some cases
with rents geared to income.
Municipalities in Metro Vancouver use a variety of approaches to facilitate affordable rental housing.
Appendix 4 contains a summary of the approaches currently used around the region.
Broadly speaking:
• Most municipalities are using their zoning authority to make affordable housing gains. Widely used
approaches include: allowing for secondary suites and laneway/coach house units; requiring some form
of protection and/or replacement requirements for existing rental units when such properties are rezoned
and redeveloped; negotiating affordable housing contributions as part of density bonusing or rezonings,
either in the form of on-site units or a cash contribution to an affordable housing fund; and parking
reductions.
• Some municipalities are reducing or waiving their DCCs (or DCLs in the case of Vancouver) for rental
housing, but about half do not.
• Some municipalities are making lands available on favourable terms to non-profits for affordable housing
but the use of this approach is limited because most municipalities in this region do not have large
inventories of vacant land that could be used exclusively for housing (the majority of municipal land
holdings are used for parks and open space, recreation facilities, community and civic facilities).
• Some municipalities are using what could be considered inclusionary requirements when sites are being
rezoned, as a means to require that new residential projects include a proportion of affordable units and/or
a proportion of two and three bedroom units for families. This is not inclusionary zoning of the sort that is
mandatory in all projects, as this is not allowed under current legislation.
• Some municipalities have policies that require the replacement of existing rental stock when sites with
older rental units are being redeveloped to higher density. In some cases, these policies are applied at
rezoning with extra density to help make the replacement of older units viable. In some cases these
policies apply under existing zoning with no density increase, so the policy generally has the effect of
preventing redevelopment because it is not financially viable.
• Only a few municipalities have adopted bylaws that use the new rental zoning tool.
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• While some municipalities have made CAC funds (from cash-in-lieu contributions at rezoning) available
to assist affordable housing construction, only Vancouver has made a major direct investment of its own
capital in the creation of new housing.
Most municipalities in the region can be characterized as having used their regulatory powers to facilitate
new affordable rental housing, but not having made large direct capital investments in the form of land or
cash for new projects. This is presumably because they see capital investment as the role of the Provincial
and Federal governments and because they do not think it appropriate to redirect existing revenues to
housing from other municipal objectives or to increase borrowing or taxation to fund housing.
There is a growing urgency among local governments to take action and there is a wide array of recent/current
initiatives and experiments. Current examples include:
• Burnaby has amended its zoning bylaw to include provision for rental residential zoning. This bylaw is
written to provide the option of layering rental density onto other density allowed on a lot. The bylaw could
be used, therefore, to zone sites entirely for rental or for a combination of rental and non-restricted
residential. The bylaw has not yet been applied to any sites.
• New Westminster has passed a bylaw to rezone some existing privately owned apartment buildings to
rental. These buildings were strata title when constructed decades ago, but have been operated as
though they were purpose built rental housing. This rezoning is intended to keep the buildings in rental
use. This has been supported by some in the community, but some of the owners are strongly opposed
and the Urban Development Institute has opposed the rezoning because of its impact on the value of the
private properties.
• New Westminster has also drafted an inclusionary housing policy for discussion during the first half of
2019. The policy proposes that all new strata projects seeking rezoning will have to include a proportion
of units that are below market rental units. The policy also outlines incentives (extra density) intended to
offset the cost.
• West Vancouver is considering offering a municipally owned site to the market for development of a
combination of strata development (to recover the initial investment in acquiring the land) and below-
market rental units that will be targeted at important segments of the work force that West Vancouver has
difficulty attracting and retaining (e.g. school teachers, first responders). The municipality is considering
a rent structure that will be affordable for entry level workers in these jobs and is sufficient to cover the
capital and operating cost of the units (but not land value).
• Richmond is considering a combination of DCC waivers and incentive density to encourage more rental
housing.
• Vancouver has modified its CAC policy so that most rental projects are not expected to pay CACs.
• Several municipalities are planning to make approvals processes faster for affordable housing projects
(although private sector and non-profit developers are skeptical about this, as they see little evidence that
the intention has been translated into real administrative change).
These are examples of a more aggressive municipal approach to encouraging rental housing that is emerging
in the region. Some of these initiatives are controversial and some will have impacts on the market that are
not yet fully understood. It is also worth noting that these approaches will make the overall regional pattern
of development regulation even more diverse than it already is. Municipalities are all working on individual
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approaches, which is challenging for regional developers (private and non-profit) who are active in multiple
communities.
2.4 Federal and Provincial Governments
The Federal and Provincial governments are injecting funds into the construction of rental housing. Most of
this money is being made available for the construction of publicly-owned non-market housing or to non-
profits, in the form of low interest loans, capital grants, and operating grants for affordable and non-market
housing.
The Province of BC has also made changes to legislation and regulations with the stated intention of
addressing housing affordability. These include:
• Adding a property tax surcharge on high value residential properties.
• Adding a speculation/vacant tax in selected urban areas (including Metro Vancouver), applied to
properties that are not principal residences and not rented out.
• Increasing the property transfer tax for higher value properties.
These initiatives along with new mortgage qualification requirements have started to reduce house sales
prices. The vacancy tax has shifted a small number of existing units into the rental pool.
In addition, the Province has reduced the maximum allowable annual rent increase in existing rental stock
and ended fixed term leases under the Residential Tenancy Act (except for units being re-occupied by the
owner). These steps benefit existing renters in the short term, but they do nothing to increase the supply of
new purpose built rental housing and may actually cause reduced investor interest in creating new product.
2.5 Two Case Studies: Seattle and Los Angeles
The study partners identified the Seattle and Los Angeles regions as interesting examples of how local
government and regional transit agencies can work together to help facilitate more affordable housing
construction. So, these two regions were examined as case studies to see what they have been doing, what
is working, and whether there are useful lessons to apply to Metro Vancouver.
These case studies are based on interviews with staff members in the cities and regional transit authorities
and a review of online documents available from the agencies.
It is important to keep in mind one important fact when trying to import lessons to Metro Vancouver from these
two American regions. A combination of laws and litigation pertaining to condo development has resulted in
a situation in which very little high density condo (i.e. strata title) development is occurring in Washington6
and California (and other states as well). The multifamily market in Seattle and Los Angeles, therefore, is
almost entirely comprised of rental housing7. As a result, rental developers have to be able to compete sites
away from lower density rental residential or commercial uses, but they don’t have to compete with strata
residential developers.
6 Washington State is considering legislation to reduce some of the risks and liabilities that have constrained development of
new condos, in order to encourage more high density home ownership options and to reduce price pressure on the existing condo stock.
7 One consequence of this situation is increased urban sprawl, as the ownership market is limited to single detached units.
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Seattle Region
This case study summarizes ways in which the City of Seattle and Sound Transit (the regional agency that
provides transit service in the large Puget Sound metropolitan area that includes Seattle, Everett, Tacoma,
and other communities) have been working to help generate more affordable rental housing in transit-served
areas.
City of Seattle
Washington state legislation enables local governments to use incentive zoning (in which increased density
is granted in exchange for defined public benefits) and to use inclusionary zoning (which requires that a
portion of the units in a new project meet affordability requirements). Seattle has been using incentive zoning
for many years to achieve benefits including affordable housing, public open space, child care space, and
preservation of farm and forest land (developers get density credits when they acquire and protect these
lands). Use of this system was voluntary; developers could decide to seek the extra density (and provide the
public benefits) or not.
In response to growing concerns about housing affordability, starting in 2016 Seattle began to plan for
Mandatory Housing Affordability (MAH) requirements. The MAH program requires that all eligible projects
must either include a prescribed amount of affordable housing or must contribute to a fund that supports the
construction of new units by the City of Seattle.
The MAH and incentive zoning programs both apply in some cases: a project can achieve extra density in
exchange for public benefits and also be required to meet the MAH conditions.
The City aims to apply the MAH requirements in all multifamily and commercial zones and in all urban villages
consistent with the City’s Seattle 2035 Comprehensive Plan. The objective is to increase housing choices,
particularly in areas that are gauged as having high access to opportunity (transit, parks, jobs, services) and
low risk of displacement of low income people. Where there is deemed to be high displacement risk, the aim
is to concentrate new development (with MAH requirements) within a 5 minute walk of frequent transit.
The key message is that MAH will apply in many parts of the City and will apply to a large proportion of new
developments.
To make the MAH system financially viable, and to address concerns about the impact on land value of
imposing new requirements, new density is being added to the zones with MAH requirements. Land
economics analysis was used to make sure there was a reasonable balance between the value added by
new density and the cost of meeting the MAH requirements. The City claims that it was primarily interested
in making sure developers would use the extra density and provide the affordable units, so was not concerned
if the deal was “too good” for developers (i.e. the value of the extra density exceeds the cost of the affordable
requirement).
Density increases are occurring across the full spectrum of neighbourhood types: some single detached
areas are absorbing duplex, duplex/triplex areas are shifting to low rise apartment, low-rise areas are
transitioning to mid-rise. The density increases and the MAH are all encoded in zoning changes enacted by
the City; developers to not have to apply to rezone.
The MAH requirements vary by zone and by location, presumably linked to market conditions and financial
viability. The City estimates that projects that provide units will have 5% to 11% affordable units and projects
that contribute to the housing fund will pay between $5 and $33 per square foot of gross project area (less
defined exclusions, which are complex).
City staff indicated that the City prefers developers to use the cash-in-lieu option as this enables the City to
tap Federal matching funding for affordable housing.
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The affordable units are aimed at certain income groups and have maximum rents (and rent adjustment
formulas) that are imposed via a covenant on title. For example, for a single person the maximum income to
be eligible for an affordable unit is $40,320 and the maximum rent is $1,008 per month for a one bedroom
unit (which works out to 30% of income). For a family of four, the income limit is $57,600 and the maximum
rent is $1,296 for a two bedroom unit (27% of income).
Because almost all multifamily development in Seattle is rental, there is no rental zoning in place. The units
provided by developers remain owned by the developers. There is a general preference to not mix housing
tenures, so in rental buildings the affordable units are rental and in the (rare) condo projects the affordable
units are condo.
The City is hoping that this system will contribute to the creation of about 20,000 affordable homes during
2016 to 2025. Because the program is new, though, not much housing has been completed. The City reports
that the pace of development applications has increased significantly.
The MAH program is not without controversy. According to City staff, there has been some pushback in
neighbourhoods that are opposed to the increased density. Based on local newspaper opinion pieces, there
are developers and commentators who say the cost of the affordable component is higher than the benefit of
the additional zoning and will lead to some projects becoming non-viable. There may even be legal
challenges, as there appear to be differences of opinion regarding whether State law allows the program as
designed. For these reasons, the MAH plan continues to be refined.
The City of Seattle also has a Housing Levy, which is a surcharge on property taxes to raise money for capital
and operating costs for affordable housing. This Levy has been in place since 1981 and has been re-approved
5 times since then. The most recent version came into force in 2016 and is projected to generate $290 million
over 7 years. The City estimates that the median cost to Seattle homeowners is about $122 per year.
Sound Transit
Sound Transit owns, builds, and operates the transit system that serves the Puget Sound urban region that
includes Seattle. There are about 50 local governments in the service area.
Since its inception in the 1990s, Sound Transit has been supportive of TOD (Transit Oriented Development)
but initially had little direct involvement in land use planning or development.
Starting in about 2010, Sound Transit elevated the priority of linking transit and development planning. In
2012, the agency’s Board adopted a Transit Oriented Development Policy that directed the agency to
consider TOD outcomes early in planning for new transit investments. The agency has a two-pronged
approach consisting of “Agency TOD”, which is the direct implementation of TOD on Sound Transit’s property,
and “Community TOD”, in which the agency supports local governments in planning for development around
transit stations.
Further strategic planning in 2012 to 2015 resulted in a greater commitment to integrating transit infrastructure
planning with local and regional land use planning. In 2015, the State of Washington amended Sound
Transit’s enabling legislation, directing the agency to do more to achieve TOD and affordable housing goals.
As a means of implementing this direction, the legislation requires that a “minimum of eighty percent…of
surplus property to be disposed…that is suitable for development as housing must be offered…first to
qualified entities that agree to develop affordable housing on the property, consistent with local land use and
zoning bylaws.” Qualified entities include local governments, housing authorities, and non-profit developers.
When a qualified developer is awarded a site, at least 80 percent of the units must be affordable to those
earning 80% of median income in the applicable county.
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To advance these goals, Sound Transit has been working on a more strategic approach to land acquisition
for transit projects. The agency is still somewhat constrained by legislation, in that it is only authorized to buy
land that is needed for transit projects, but it is trying to become more strategic about when it buys land,
where it locates stations (and buys land), and parcel configuration so that any lands that are surplus post-
construction are workable development sites.
There have been a few pilot projects in 2017 and 2018, totaling about 600 units. But the agency is now
gearing up with more staff to work with local governments to integrate land use and transit planning and more
staff advising on land acquisition.
Sites designated surplus and made available for affordable housing are offered via Request For Proposals
(RFP). Prior to issuing an RFP, Sound Transit works with the applicable local government and communities
to establish goals, priorities, land use, and density for the site. Successful developers are responsible for
final design and approvals and the transactions do not complete until all necessary permits are issued. Sites
have been offered for sale or long term lease. The degree of discount from market value depends on the site,
the location, the concept plan, and the developer.
Making surplus lands available for less than market value has triggered some debate. Some stakeholders
take the view that lands should be sold at full market value to provide revenue for transit infrastructure. On
the other hand, there is support for helping achieve more affordable housing in transit-served locations.
Generally, support for affordable housing is stronger in the region’s core (Seattle) and less so in smaller
outlying areas that want to see transit spur market development.
Some projects have contained all affordable units and some have been mixed market and affordable. All
development so far has been rental, consistent with general market trends.
The local market has been slow to warm to the idea of long term land leases, so there is a preference for
sale. Sound Transit hopes to make more use of land leases in the future.
Affordable housing units remain owned by the developer, with housing covenants in place to maintain
affordable rents.
So far, most development has been in the City of Seattle; Sound Transit has been careful to not be too
aggressive in promoting affordable housing in outlying communities. The agency is focusing on developing
guidelines for land acquisition, determining which property is suitable for housing, and determining how much
of a discount on land price is appropriate.
Los Angeles Region
City of Los Angeles
In late 2016, voters in the City of Los Angeles approved a measure to require that developers requesting
additional residential density provide affordable units or pay a cash-in-lieu fee. The same measure required
the City to create a program to provide incentives for affordable housing near transit. In late 2017, the City
initiated its Transit Oriented Communities (TOC) Affordable Housing Incentive Program. This program
encourages affordable housing within about 800 meters of major transit stops by providing additional density,
reducing parking requirements, and providing other incentives.
The affordable housing requirements in a project apply to total floor area (not just the new density). Affordable
units are secured by covenant (through the City’s Housing Department) and continue to be owned by the
developer. Because there is little condo market activity in Los Angeles almost all of the housing being
provided in this program is rental.
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The affordable requirement was introduced at the same time as new density, with the increases intended to
exceed previously allowable density bonuses and intended (based on financial analysis) to ensure that
developers would have incentive to proceed under the TOC program. The available extra density is matched
to the level of transit service.
The parking reductions are also regarded as a key part of the incentive package.
While the TOC program has not been in place for long, the City indicates that about 10,000 new units, of
which 2,000 are affordable, are in the application process. This has caused some observers to wonder if the
City gave away too much density, but there is a debate about whether it is better to over-incentivize and get
more units than to worry about ensuring an even balance.
The TOC program exists in parallel with the City’s pre-existing density bonus program. Developers can
evaluate both options and select the optimal approach.
Los Angeles has also adopted a Linkage Fee for affordable housing, which is like an impact fee or like a
Development Cost Charge for housing. This fee applies to most new development including single detached
units, but TOC projects are exempt. The ratio of projects choosing the TOC route versus the density bonus
route increased significantly once the Linkage Fee and its exemptions came into force. City staff think
developers are preferring to absorb the cost of affordable housing into their own projects rather than write a
cheque for the Linkage Fee.
There has been some community backlash in areas that have received a large increase in development
activity. Some of this new development may be due to market conditions, not the TOC program on its own,
but some residents and politicians are wondering if the program should be revised to require more affordable
housing in order to slow the pace of activity.
The system for determining the affordable housing requirement and the incentives for a site is complex. In
simplified terms, the system works like this:
• The affordable housing requirements, availability density bonus, and other incentives are codified in the
City’s zoning, so they are generally “as of right”.
• Sites are classed as Tier 1 through Tier 4 depending on the level of transit service and the distance to
transit (Tier 1 is the lowest extra density and Tier 4 is the highest).
• Each Tier has a defined requirement for affordable housing, for which the developer has several options.
For example, a Tier 4 project requires that 11% of the units be affordable for Extremely Low Income
households, or 15% of the units be affordable for Very Low Income households, or 20% of the units be
affordable to Lower Income households. These income levels are defined in California state legislation.
• Each Tier has a defined increase in the number of dwelling units and a defined increase in density. For
example, in Tier 4, a project can increase the number of dwelling units by 80% and increase the allowable
density by 55%.
• Each Tier can achieve a defined decrease in required parking, ranging from 0 to 1 stall per unit.
• Each Tier also has other incentives such as reduced setbacks, reduced requirements for on-site open
space, and increased site coverage.
• Projects can achieve additional incentives if they exceed the affordable housing requirements for the Tier.
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LA Metro Transit Authority
LA Metro has a Joint Development Program that is intended to optimize the use of its properties for private
or public sector development.
The program is intended to achieve three major goals8:
• Transit prioritization, which includes preserving the ability to develop and operate the transit system
and using properties in ways that will increase transit ridership.
• Community integration, engagement, affordable housing, and design, which emphasizes
stakeholder engagement, compatibility of new development with the surrounding neighbourhood, high
quality design, and housing affordability. The target is to achieve 35% of new units being affordable for
households that earn 60% or less of the median income for the area.
• Fiscal responsibility, which includes maximizing revenue (although this is potentially at odds with the
affordable housing requirement), minimizing risk, and ongoing financial sustainability.
To contribute to affordable housing and increases in transit ridership, LA Metro makes surplus lands available
for residential development. Some sites are available for market development and some include affordable
housing (secured by covenant). If affordable housing is included, the value of the land can be discounted by
up to about 30% less than fair market value.
LA Metro’s role in new development is limited to making land available. The “Joint” in the program title does
not refer to direct investment in the housing.
The surplus lands are mainly lands acquired by LA Metro when preparing for new transit projects. Land
acquisition is managed strategically to optimize the opportunity for post-construction development
opportunities. These opportunities include:
• Sites that were acquired for construction lay-down and staging.
• Sites over transit infrastructure.
• Additional lands that were acquired strategically (e.g. buying whole sites rather than partial sites or
acquiring extra land to avoid creating awkward or undevelopable parcels post-construction), although the
agency is careful to avoid backlash due to “too much” government land acquisition.
Sites are almost always leased, on terms ranging from 55 to 90 years. The leases are usually prepaid, but
there is sometimes an annual rent component including percentage rent when retail is included. Land and
improvements revert to LA Metro upon lease expiry.
Almost all the housing is rental, which matches the overall market and is consistent with the leasehold land
tenure.
When a site is identified as a development opportunity, the first step is extensive community consultation with
residents and the applicable local government to develop an accepted vision for the uses, density, and height
of the project.
When there is a clear consensus on a development concept, LA Metro takes the site to the market via RFP.
Proposals are evaluated, and LA Metro selects a preferred developer based on criteria including affordable
housing and land price. LA Metro then enters into an Exclusive Negotiation Agreement with the selected
8 These goals could conflict, so presumably the organization seeks to find optimal balance.
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developer, with 30 months to finalize the development plan, agree on detailed financial and lease terms, and
obtain necessary municipal approvals. If the concept requires rezoning, this is not usually a challenge
because of the extent of initial consultation. The final package of agreements includes the land lease, a joint
development agreement (which governs the concept), and a covenant on the affordable units.
The lease includes a positive obligation regarding commencement and completion of construction but there
is flexibility, especially to allow time for affordable housing projects to secure their financing.
Most of the properties that will become available were acquired long before they became potential
development opportunities. So, LA Metro regards these as not losing money if they are leased for less than
market value (although this implies that the agency does not weigh the opportunity cost). There does not
seem to be much pushback regarding the discounting of land value (which is allocating money to affordable
housing that otherwise could be applied to transit), apparently because the amount of money involved in the
discounts is a very small part of the total transit budget.
LA Metro estimates that the program has resulted in about 6,500 housing units so far, with another 6,000 in
the pipeline and likely to be developed over the next 5 years or so.
The program has also resulted in some retail and hotel development.
There is very large future development potential, as LA Metro has about 80 rail stations in operation and
another 90 being planned.
LA Metro interacts positively with the City of Los Angeles and its Transit Oriented Communities program,
which helps make projects viable because of the extra density and the parking reductions.
2.6 Other Research
An extensive literature review was not part of the scope of this project. However, the work included examining
some “overview” work by academics and housing advocates on the subject of inclusionary zoning, which is
a widely used tool to create more affordable rental supply.
Some key common points emerge:
• Inclusionary requirements tend to be more effective in strong real estate markets. This is because the
high value of market units (strata or rental) is needed to offset the cost of units provided at below market
rent. Without extra density, inclusionary requirements can only work (if at all) in the locations with the
highest market rents and strata prices.
• Inclusionary requirements are almost always linked to concurrent zoning-based incentives (such as extra
density, reduced parking requirements) to make projects viable. Inclusionary zoning on its own (i.e.
without density bonus or other incentives and subsidies) is not likely to produce many affordable rental
units, because development economics limit the proportion of affordable units that any project can
support in the absence of offsetting incentives.
• Inclusionary zoning where successful means that new market housing is happening. This means area
redevelopment, which can imply the conversion of older neighbourhoods to new, higher density areas.
• Flexibility in meeting mandatory affordable housing requirements is common, with some jurisdictions
allowing a cash-in-lieu option or the ability to provide units in another location.
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2.7 Perspectives of Housing Developers in Metro Vancouver
Discussion groups were arranged to learn about the perspectives of private and non-profit housing
developers in the region.
Perspectives of Local Private Developers
Several local developers of rental housing participated in a discussion about the challenges of developing
new projects. The group included developers who build projects to hold in their own portfolios and developers
who build for institutional portfolios.
The key messages from private rental housing developers in Metro Vancouver were:
1. It is getting more difficult to make new projects financially viable. High land cost is a major challenge but
in addition construction costs are rising and investor cap rates9 are rising. A key impact of rising cap
rates is that investors will pay less for a given asset, meaning that developers have to produce a project
at lower total creation cost (land plus construction plus profit).
2. Changes to rent regulations risk making new projects less likely. Investors are concerned about the risk
that rents will not be allowed to keep pace with market growth or with escalation in operating and
maintenance costs, and that rents will be not adjusted to recover reasonable renovation and update costs.
3. Rental does not work if full market value must be paid for land. Rental requires that new density be
created via rezoning, with the density available at less than market land value. Some developers argue
that new density for rental should have no cost (i.e. no Community Amenity Contribution) and it is better
for local government to maximize the incentive for rental construction rather than worry about under-
realizing potential CAC revenue.
4. Approvals processes are too complex, too time-consuming, and too expensive. Developers familiar with
Vancouver and Seattle indicate that project approvals are significantly faster in Seattle. Developers also
express concern that “affordable” is defined differently across the various municipalities in Metro
Vancouver and suggest that there be more consistency in approvals processes and requirements.
5. Developers suggest that there should be more flexibility in finding ways to meet rental housing
requirements. Once the value of an affordable housing contribution is agreed on in a rezoning process,
there should be some flexibility as to whether the affordable housing requirement is satisfied by units on
the site, units at another acceptable site, or via cash-in-lieu paid into an affordable housing fund. Not all
projects can easily accommodate affordable units on site, so this flexibility would allow more projects to
proceed.
6. When a development project is required to include affordable rental units, developers would prefer to
retain ownership of the units (with the obligation to maintain rents at agreed-on levels) rather than have
to turn ownership over to the municipality or a non-profit.
7. Developers generally prefer to not have to use airspace parcels or other means to integrate affordable
rental projects into strata projects or market rental projects, if the affordable units will be owned by another
entity. Developers and investors prefer to avoid future negotiations or conflicts with other parcel owners
regarding the timing and amount of capital expenditures, the amount of strata fees, timing of renovation
9 A “cap rate” or capitalization rate is a commonly used, simple indicator of investment performance which links the net operating
income from an income-producing asset to its value. Appendix 3 contains a detailed explanation.
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and other asset management decisions. They much prefer stand-alone, independently owned rental
projects.
Perspectives of Non Profit Housing Developers
Several non-profit housing agencies participated in discussions about the challenges of developing new non-
profit projects. These discussions occurred over two workshops and one conference call, with different
participants in each.
The key messages from the non-profit rental community were:
1. Most non-profits are developing lands they already own or that are provided to them pursuant to rezoning
negotiations. Few are in the marketplace buying development sites.
2. Their main financial challenges are finding sufficient capital funding and (for very low rental projects)
operating funds.
3. The non-profits generally find local government approval processes too long, too complex, and too costly.
They also sometimes find that local government expectations regarding design, construction quality, and
servicing costs make it challenging for projects because of the extra capital cost. The non-profits generally
think local governments could do a better job of fast-tracking approvals for affordable housing projects
and adapting requirements to match the budget constraints of affordable housing. They don’t expect
municipalities to approve bad design or poor quality, but to be cognizant of the costs of requirements
imposed on non-profit projects.
4. Non-profits generally prefer to own and manage stand-alone buildings where they have control over the
building, the units, and long term decisions about capital investment or redevelopment. This avoids the
need to negotiate with other owners about operations, budgets, and major decisions. It also gives them
the ability to more easily cross-finance projects (e.g. use the value of one project to assist with financing
new projects) and it allows them to benefit from appreciation in the land.
5. Non-profits generally think that affordable rental units should be controlled by non-profits not by private
developers. They believe that even though private developers can be bound by covenants and operating
agreements there will be a tendency to stick to the “letter of the law” rather than make decisions that are
in the best interests of the renters. The missions of non-profits are generally aligned with the core
objective of affordable housing, so are likely to produce better long term outcomes for renters (such as
improving affordability when refinancing allows smaller rent increases).
6. When non-profits have to partner with private developers on mixed tenure developments, there is a
concern that some non-profits are not as well-equipped as they should be to negotiate deals. There may
be times when non-profits don’t maximize their outcomes in these deals or when the private partner
achieves better returns because the non-profit receives less.
7. Non-profits think that local governments should be doing more to reduce the construction cost of new
projects, by reducing approvals times, reducing parking requirements, or waiving DCCs. They
acknowledge that some municipalities are doing a good job, but others do not appear to put enough
priority on taking steps to make rental housing cost less to build.
8. Non-profits sometimes experience neighbourhood resistance to increased density and to the inclusion of
some kinds of affordable housing. More planning work or more effective engagement processes are
needed to identify and confirm locations for higher density, diverse housing development.
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9. Non-profits have mixed views on how private developers should meet affordable housing obligations
associated with rezonings. Some see the financial value of allowing developers to provide units in
locations where housing costs are lower (lower land value, lower density that can be built with wood
frame), so that a given housing contribution could yield more units, but there is concern about affordable
housing being relegated to poor locations and there are different perspectives on whether there should
be a diversity of housing options in all locations or whether diversity at a broader community scale is
sufficient. Where affordable housing is provided on the same site (or in the same building) as market
housing, non-profits are not supportive of making sharp distinctions between housing types, such as
segregated outdoor spaces or separate entrances.
10. The non-profits perceive that there is a wide variety of organizations that own land that could be used (in
whole or in part) for housing, but they don’t take action because they have not traditionally been involved
in the housing sector. School districts with surplus lands, Legions, local libraries, and labour organizations
are examples of organizations that have land that could possibly be used for housing without necessarily
reducing the ability of the agency to meet is primary objectives. Some of these agencies are beginning
to explore ideas; for example, the Vancouver School Board is exploring the idea of creating housing for
teachers on school sites with extra land. However, the non-profit housing providers think that more non-
profit and government entities could get involved in providing land for housing. They will need technical
and financial assistance and will have to adjust their mandates accordingly.
11. Some non-profits perceive that the private sector aims to make too much profit from housing
development, a perspective that likely stems from very different motivations and different expectations
about return on investment and risk.
12. Some non-profits suggest that there is an important role for governments (local, Provincial, and Federal)
to create larger portfolios of land that can be made available for affordable housing development, so that
affordable housing providers do not have to rely so heavily on rezoning, density bonusing, or CACs to be
able to develop projects. Vienna is cited as an example of a city in which government has assembled
over time a large portfolio of land that is used for rental housing with rents set at affordable rates based
on incomes.
Similarities and Differences
Both groups have similar perspectives on some items:
• They prefer independence in the ownership and operation of affordable housing projects.
• They think approvals process need to be shortened and reduced in complexity.
• They both deal with the challenge of high land value.
They differ with regard to the ownership of affordable housing:
• Developers would prefer to keep the units, with rent restrictions, as this is better financially and they
believe it could yield more units.
• Non-profits see themselves as more likely to prioritize the interests of renters, including increasing the
affordability of rents over time.
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Part 3: Strategies to Address Land Availability and High
Land Cost for Rental Housing
This part of the report describes and evaluates four possible strategies for addressing the barriers of land
availability and high land cost.
3.1 Acquiring and Deploying Land for Affordable Rental Housing
One obvious way to eliminate land cost as a financial barrier to new rental housing construction is to make
land that is owned or controlled by local entities available on favourable terms. This already happens in a
variety of ways:
• There are non-profits that have operated affordable housing on sites they have owned for a very long
time. These agencies can redevelop and densify their sites without having to make a new outlay of cash
to buy the site.
• There are non-profits, such as churches, that are using part of their sites to accommodate new market
and affordable housing. Such groups may be trying to extract some value from their land to fund new
facilities and to support new housing.
• Some local governments have made civic land available on favourable terms for affordable housing
construction, such as long term land leases for a nominal land rent.
• Regional, Provincial and Federal agencies have developed land, or made it available for affordable
housing.
As shown earlier in Exhibits 1 and 2, eliminating land cost has a large impact on the financial viability of
affordable rental and market rental (although it is not enough on its own to deal with the challenge of affordable
rental housing for households with low income).
It would not be helpful to suggest that the only way to deal with the land availability barrier is for non-profits
and governments to just go acquire a large new portfolio of property that could be made available for rental
construction. This is a solution, of course, but one that involves significant capital outlay to acquire enough
land to make a dent in the need for new units. As this is not currently happening on a large scale, it is
reasonable to assume that, for now, governments and non-profits are not able or willing to make this
additional investment. Non-profits rely on philanthropy and grants, so their ability to acquire property in the
market place is limited by their funding. Governments rely on taxation and have many competing priorities for
spending; a significant new outlay for housing land requires increasing taxes or shifting spending away from
other programs.
This section concentrates on ways to make land available without large new outlays of cash.
Three different approaches are considered:
1. Deployment of lands already owned by local governments or other local and regional government entities.
2. Creative acquisition of land by local governments and other local and regional entities.
3. Deployment of lands already owned by non-profits. (New acquisition by non-profits is not considered, as
this means either getting access to lands in the two above approaches or obtaining funding to acquire
land).
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3.1.1 Deployment of Lands Already Owned by Local and Regional
Government Entities
As previously noted, this already occurs albeit on a limited scale. Several municipalities have made civic-
owned lands available for housing on favourable lease terms.
More of this could be done, if agencies with land are willing to become more creative in the use of their
property to achieve multiple objectives.
Before exploring these possibilities, though, it is important to understand that this approach has financial
consequences that should be considered when making land available.
Lands that are already owned, especially if they were acquired in the past at relatively low (by current
standards) cost, can be made available without a new investment of cash or new borrowing. Such lands,
however, should not be thought of as “free”. Lands owned by local and regional entities could be made
available for sale or lease on the open market for urban development. Disposing of the land in this way would
yield the market value of the land, which would then be available for a wide range of civic purposes including
capital expenditures on civic facilities, paying down debt, or funding municipal operating costs, any of which
would presumably mean that municipal taxation could be lower than it otherwise would be. Allocating land to
affordable housing, at no cost or based on very modest return, means foregoing alternate uses of the land
and foregoing the revenue that could otherwise be obtained (i.e. the opportunity cost). This can be a
reasonable choice, if housing is a local priority, but it is a choice that should be recognized for what it is: an
allocation of a resource that could otherwise be used for other civic purposes or financial outcomes.
The financial impact of foregoing some or all of the revenue from land disposition is obviously directly
proportional to the value of land in each submarket and depends on what the land could be otherwise used
for. If strata is the most likely alternative market use of a site considered for rental housing, the range in values
in Metro Vancouver is wide. Land values for most strata residential development sites in the region are in the
range of about $50 to $500 per square foot of developable floor area10.
One way to make the financial trade-off is to make land available for housing at no or low initial cost, with a
requirement for future land rent payments when net operating income permits. This could be called patient
investing, as it foregoes the initial revenue from sale in favour of longer term returns from leasing.
Municipalities of course could choose to value land at less than strata values; they could set their expectations
based on the value supported by affordable housing or the value supported by rental zoning. However, this
does not change the fact that this would be a deliberate choice to forego revenue. It could be financially
challenging for a local government to forego this revenue, so this suggests it is worth looking for properties
that could accommodate affordable housing but that would not otherwise be marketable, disposable, or
developable as prime private development sites.
For example, some land allocated for civic uses could possibly also include housing, such as recreational
and community facilities, libraries, or schools.
10 Of course there are sites outside the low and high end of this range, but this range likely captures 90% or more of development
properties. So, a site of 25,000 square feet zoned for residential at FSR 2 (which is achievable in a low rise form) would be worth $2.5 million to $25 million depending on which submarket it is in.
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There are many illustrations of this kind of opportunity in Metro Vancouver, such as:
• There are many properties owned by School Districts that are larger than required for the operation of
the school. Vancouver School Board has expressed the intention of looking for opportunities to
incorporate rental housing for teachers at sites that have the capacity. Across the region, there are many
sites where this is an option although there are tradeoffs involved. Housing on school sites must either
occupy a portion of the site that would otherwise be open space (which could be surplus to the required
land area for operation of the school, but which the community might regard as “park”) or must be
integrated into the construction of a new school building, which will require special care with regard to
safety and operations.
• Civic properties used for some kinds of recreation facilities could incorporate rental housing, if there is
unused land or there is potential to integrate housing into a new recreation/civic complex. (This is not a
municipal example, but an illustration of this approach is the rezoning application by YMCA to redevelop
its existing older recreation facility on West 49th Avenue near Cambie Street in Vancouver, with a rental
housing project to be developed on top of the new Y recreation facility).
• The City of Vancouver has several older community branches of the Vancouver Public Library that are
typically on major commercial streets with good bus service. These facilities are aging and could be
redeveloped as mixed use projects with a new library at grade and affordable housing above.
• Properties owned by the Province or Canada that could be made available for affordable housing as part
of redevelopment projects.
• There are potential development properties at several existing stations on rapid transit lines in the region.
Some of these are admittedly complicated in physical terms, but they could be reconfigured to yield
housing development sites. The King Edward station on the Cambie line has already been used for
housing (mostly strata), illustrating the potential for this form of development. Other possible examples
include:
o Air rights development over transit stations.
o Creative use of segments of the Expo line right of way that are larger than needed for transit. There
are such sites in Burnaby, for example.
o Reconfiguration and new development at bus interchanges such as at the Nanaimo and 29th Avenue
stations on the Expo line.
For these transit-related properties to become sites for affordable housing, several steps are needed.
First, the land owners must cooperate. Lands occupied by transit infrastructure around the region are
variously owned by TransLink, the Province, BC Hydro (such as the Expo Line), others, or some
combination. Using the Expo Line as an example, TransLink has the right to use this land for transit but
not housing. BC Hydro can’t use the land for any purpose that impairs TransLink’s rights. A cooperative
approach is essential. Second, the incorporation of urban development beside or over transit
infrastructure must be possible without impairing the operation, maintenance, expansion, or eventual
replacement of the transit infrastructure. Third, local governments would have to be supportive of high
density development in these locations. Fourth, all parties would have to agree on development concepts
that are physically feasible, financially viable, and include some affordable housing. Not all of potential
sites will prove to be feasible development opportunities. However, across the region there are likely
many properties that could be developed to include affordable housing if the public sector owners are
willing to think creatively about multiple uses of sites. The inclusion of rental housing in such projects
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means that lands will achieve lower value than if they were developed for only market strata use; however,
depending on when the lands were acquired and how much was paid, it is possible that the proceeds
from disposition after rezoning could be higher than what was paid if the right mix of market housing,
affordable housing, and commercial use is included. This approach means a shift in mandate, which will
require careful consideration as it means that less revenue than might have been available would be
applied to transit infrastructure. Other transit agencies – such as Seattle and Los Angeles – have made
this shift because their mandates have been broadened to also include helping achieve affordable
housing at transit locations.
3.1.2 Creative Acquisition by Local and Regional Entities
Local and regional agencies have ways to acquire potential housing sites that do not involve significant direct
expenditure.
Local Governments
Local government have the ability to acquire land, either by negotiating the purchase or by expropriation, for
civic purposes which could include affordable housing. However, these approaches require paying market
value for land.
For local governments to acquire land without paying market value, the main opportunity is to negotiate to
take title to parcels of land that are part of large rezoning and redevelopment projects. Such parcels would
be considered amenity contributions and could be in place of obtaining other public benefits such as cash
contributions, amenities, or units within a project. The advantages of taking parcels of land include:
• flexibility to make the site available for different forms of housing and to different housing providers.
• ability to have stand-alone affordable rental housing projects that are not incorporated into projects with
other kinds of units.
• perpetual ownership, which allows control over future long term redevelopment and access to land value
growth in the long term.
This approach obviously only works with large scale redevelopment projects in which (a) there is enough
extra density being provided to the developer to offset the cost of providing the parcel and (b) the site is large
enough to enable subdivision to create multiple parcels.
Local governments launching area planning programs, that anticipate redevelopment and densification, also
have an opportunity to aid affordable housing by planning for residential development on civic lands and in
some cases by acquiring key sites that are likely to have increased density.
TransLink
One regional agency with a significant future opportunity to acquire new land for housing is TransLink, if its
mandate is broadened to include more support for affordable housing. When acquiring lands for new transit
infrastructure, TransLink has tended in the past to acquire the minimum needed to meet its transit construction
needs, because this is consistent with the South Coast British Columbia Transportation Authority Act (the
legislation that defines TransLink’s responsibilities and powers), which states that:
• The purpose of the agency is to “provide a regional transportation system” (Section 3).
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• The agency can “…acquire…real or personal property required for the regional transportation system”
Section 4.1.e).
• The agency may acquire land “…other than by expropriation that is not required for the current
plans…but…will be required in the future” to facilitate the construction of the regional transportation
system (Section 6).
• The agency may “to carry out its purpose” expropriate land (Section 6).
• The agency may “hold, manage, develop, and dispose of land” (Section 6).
These extracts indicate that TransLink is not specifically empowered to become a housing agency or to
acquire land with the primary objective of helping address housing affordability. TransLink’s internal policies
support working with partners to deliver affordable housing, provided TransLink receives full market value for
its land and does not provide any subsidy.
However, other transit agencies (see the Seattle and Los Angeles case studies) have had their mandates
broadened to recognize that the process of acquiring land for the construction of new transit facilities creates
the possibility of also working toward the collateral objective of making land available for affordable housing
development. The Seattle and Los Angeles regional transit authorities have adopted a strategic approach to
land acquisition for transit projects in order to watch for and act on opportunities for post-construction housing
development, such as:
• Choosing station locations with an eye to transit system design as well as opportunities for redevelopment
including affordable housing.
• Acquiring sites with an eye to optimizing the potential for post-construction disposition of land or air rights
for housing development.
• Acquiring land well in advance of transit construction, to minimize acquisition cost and to create potential
for gain in land value.
• Disposing of some lands at less than market value, to assist affordable housing creation.
These strategies could be applied by TransLink in Metro Vancouver when it is acquiring land for construction
or expansion of transit facilities, although there are some limitations on this approach:
• Most projects that integrate housing with transit infrastructure will have to be concrete, so
construction is more expensive. A mix of market and affordable housing will be needed to make the
numbers work.
• The lift in value from upzoning must accrue to TransLink to create revenue for transit infrastructure
and to support affordable housing.
This approach is not intended to be a substitute for other initiatives; it simply acknowledges that station
locations are good places for high density urban development, that integrating development into the station
makes for a more lively environment, and that mixed use is a more efficient use of land. Integrated
development should happen in any case but it also creates an opportunity to include some affordable housing.
To implement this approach, TransLink would need:
• Acceptance of (or legislative amendments to permit) an expansion of its ability to acquire land beyond
the strict requirements for transportation construction.
• The ability to dispose of surplus lands for residential development at a price that generates revenue but
that also helps in creating affordable housing near transit.
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3.1.3 Deployment of Lands Already Owned by Non-Profits
Non-profits that are already housing developers have land and have the wherewithal to tap sources of funds
and expertise to develop (or redevelop) projects.
In Metro Vancouver, there is a wide range of non-profit or charitable entities that have lands for some purpose
other than housing. Some of these have ventured into affordable housing, but many have not.
Some examples of projects by entities that are not housing developers per se include:
• Some churches have used surplus portions of their sites to accommodate residential development to
generate revenue to apply to new or improved church and community facilities and/or to apply to
affordable housing construction.
• YMCA has leveraged its land holdings to fund new recreation facilities and is now also considering
incorporating rental housing in a new project.
• A Vancouver teachers’ association is proposing to redevelop its office site to create new, expanded office
space for its organization and to include rental housing in a mixed use development.
There are opportunities scattered across the region for more initiatives like this.
Legions, labour organizations, and churches are examples of users with properties, many of which are in
locations in which redevelopment including housing would be appropriate. While registered charities have
restrictions on the kind of housing they can provide, these organizations are not constrained from making
sites available for housing development by others (either market rental or affordable rental).
Non-profits report that there are barriers for these kinds of organizations, including:
• Their current mandate does not include housing.
• They are run by volunteers, who may not have the inclination, time, or expertise to consider
redevelopment including housing.
• They may be short of funds for the necessary initial work for feasibility analysis and engagement with
municipal approvals processes.
These kinds of non-profits would benefit from easy, economical access to development planning assistance,
to help them explore the potential for redevelopment to unlock value to create new facilities for their primary
purpose as well as provide rental housing. For new rental housing created in this way to be affordable, the
non-profits would have to be willing to receive less than full market value for their land.
3.2 Using Rezoning to Achieve Affordable Rental Housing Supply
The use of municipal zoning powers has been the principal means by which local governments have tried to
address the need for affordable housing in Metro Vancouver during the last 20 years or so.
In BC, local governments have two different ways to use zoning, based on the Local Government Act, to
obtain public benefits including affordable housing. These are usually called Density Bonusing and
negotiated Community Amenity Contributions.
Density Bonus
Density bonusing is authorized by Section 482 of the Local Government Act (and a similar provision in the
Vancouver Charter), which gives municipalities the ability to zone land for a base density, which is achievable
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without providing any public benefits, plus supplemental density that is available (at the developer’s option)
in exchange for providing prescribed public benefits. The public benefits can be in the form of community
amenities, affordable housing, cash-in-lieu, or some combination.
When used to achieve affordable housing, a density bonus zoning bylaw may include conditions relating to
the affordable housing including the number and kind of units and may include the requirement to enter into
a housing agreement as defined by Section 483 of the Local Government Act. A housing agreement can
specify the form of tenure of the units, the availability of units to “classes of persons”, and the rents or sales
prices that can be charged (or a formula for determining them). Such agreements, therefore, are broader in
scope than rental zoning, because of the ability to set rents and define specific target client groups.
Density bonusing has these advantages for affordable housing:
• It is explicitly permitted in the Local Government Act.
• It can be tied to a housing agreement registered on title, which can specify conditions including rental
tenure, target tenant types, and rents.
• It requires an explicit, transparent link between the extra density that is available and the benefits that
must be provided. This is good for developers and community groups looking for predictability.
• It can be implemented via area-wide rezonings, eliminating uncertainty in the planning and approvals
process for areas undergoing redevelopment and densification. In these cases, the density bonus bylaw
requires that the municipality decide in advance on its allowable densities and priorities for public benefits
rather than determine them site-by-site. This “pre-zoning” reduces approvals time, cost and risk. This
approach is most effective when potential development sites in an area have similar attributes in terms
of existing use and proposed new density.
There are some disadvantages:
• If applied via advance rezonings of areas, there is a loss of flexibility in defining the achievable density
and the required public benefit contribution, because the density and benefits are formulaic not tailored
to each project.
• If applied via advance rezoning of areas, the quantum of public benefit per increment of new density must
be set to work on all redevelopment sites; this means the benefit contribution is not “right sized” for each
site, which inevitably means the total public benefit yield from an area will be lower than if the contributions
were determined on a site-by-site basis.
• The bylaw must be updated regularly to make sure the density and the benefits schedules (either for
physical benefits such as affordable housing or cash-in-lieu) are current.
Community Amenity Contributions
Negotiated Community Amenity Contributions (CACs) are also sometimes called voluntary amenity
contributions or something similar. This method involves negotiations between the municipality and the
developer regarding the provision of public benefits as part of a rezoning package for a specific site that
includes a change in use and/or a change in density.
BC municipal law does not explicitly empower local governments to exchange density for public benefits.
This ability flows indirectly from other elements of municipal governance, as follows:
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• In BC, elected Councils have the full authority and responsibility for deciding whether a change in zoning
is in the community interest. Councils do not have to modify their zoning bylaws to match the land use
policy in their Official Community Plan, so can make individual rezoning decisions based on the merits of
each application. (It is noteworthy that there are jurisdictions where a change to a community plan
automatically triggers an obligation to make corresponding amendments to zoning). Except in rare cases
in which a municipality acts outside its authority or fails to adhere to procedural requirements, there is no
avenue to appeal a zoning decision to the courts (which is also different from jurisdictions where there is
an appeal mechanism).
• Councils have an implied obligation to consider the interests of the community when making rezoning
decisions, which includes determining whether a rezoning would impose unacceptable impacts or
financial burdens on the community, such as a need for investment in infrastructure or amenities, traffic
impacts, or impacts on the affordability of housing.
• Because new density has value, developers have an incentive to address the impacts of developments
or to provide benefits that attract support for (or at least lessen opposition to) projects. The new density
is typically available on terms that (after providing public benefits) still generate some lift in land value for
the land owner and create the opportunity for the developer to earn profit on the additional floorspace
allowed by the new density. This creates the potential for a win-win-win in which there is additional land
value for the land owner (providing an incentive to sell land into the redevelopment market), additional
opportunity for the developer, and benefits for the community and local government.
Because of these conditions, it has become common for local governments in BC to negotiate for public
benefits when properties are being rezoned to allow redevelopment. Sometimes these contributions are
negotiated on a site-specific basis when a property is proposed for rezoning. In other cases, the local
government uses a target rate (expressed as dollars per square foot of additional density) that is intended to
be more efficient and more transparent by simply articulating the expected contribution rather than requiring
a site-by-site analysis and negotiation. Determining the appropriate CAC (or benefit required for a density
bonus) requires an understanding of the housing market and development economics, as well as skill in
negotiating.
For the development industry and the community to have confidence in the outcomes and the fairness of the
process, there is also a need for consistency and transparency. Municipalities in Metro Vancouver use
different approaches, have different expectations, and have varying skill sets which result in different
outcomes. This causes some criticism of CACs, as they are not always predictable, transparent, or consistent.
Municipalities have discretion to use CACs for amenities (e.g. child care, recreation facilities), affordable
housing, or other public benefits. Policy is needed to set out local priorities for the allocation of CACs among
possible uses.
When CACs take the form of affordable housing, the benefits can be in the form of actual housing units or
cash-in-lieu. When units are provided, they are typically subject to a housing agreement which specifies the
rents.
CACs in the Housing Market
Density bonusing and CACs are commonly used in Metro Vancouver. Municipalities and the development
sector are generally very familiar with (if not always equally supportive of) the concept.
Because these approaches are widely used, this report does not include a detailed introduction to these tools;
this information is available in a variety of publications. However, based on extensive work with local
governments and the development industry on the application of these tools, there are some key points worth
noting about how CACs play out in the housing market.
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First, it is necessary to address the claim that is sometimes made that the cost of amenities is passed on to
renters and buyers in the form of higher prices. This is not true, for two reasons.
One reason is that residential prices and rents are set by the market; developers cannot arbitrarily add a cost
onto market price. It is easy to demonstrate that cost and price are not necessarily in lock-step:
• In Metro Vancouver, over the last few years condo prices have been rising at over 10% per year (until
the market downturn starting in 2018 due to new taxes and tighter mortgage rules). Construction costs
have been rising, but not as fast. Something else is driving price11.
• Prices vary widely across the region (for example a new mid-market strata unit in Vancouver can sell for
two or more times the price of a similar unit in Surrey, even though construction costs do not differ by that
much). Higher demand is pushing price, not higher costs.
• Suppose a developer can complete a new project with total cost for land, construction, marketing,
municipal fees and a typical allowance for profit all amounting to $800 per square foot. But new units in
the neighbourhood are selling for $900. Does the developer sell at the prevailing market price or at the
lower “cost plus” price?
Secondly, and this is the more important point, public benefits from rezoning (either density bonus or
negotiated) are always linked to a change in use and/or a change in density that increases the physical
capacity for development. This increased capacity for development (i.e. density) has value, because it is
equivalent to buying land. Local governments in Metro Vancouver almost invariably seek public benefits
(amenities, cash-in-lieu, or affordable housing) that cost less than the market land value of the extra density.
In effect, private developers tapping extra density in this way could bring units to the market at less than
market price if they took the cost-plus approach to setting sales price. They don’t because prices are set in
the marketplace by the demand for and supply of new units. Not-for-profit developers can bring housing to
the market at lower rents if they obtain extra density at less than its market value.
By making rezonings more likely to be approved (by generating benefits that offset some of the impacts and
make redevelopment more acceptable than it otherwise would be), by adding new physical capacity (i.e.
density) for housing, and by making capacity available at less than the market price of land, density bonusing
and the payment of CACs do not cause upward pressure on housing prices. The opposite is true: by helping
add supply, these tools put downward pressure on housing price12.
Charging CACs per se does not impact market pricing. However, the process of determining a CAC can have
an effect on the market, in these ways:
• If negotiating a CAC adds to the length of the approvals process, then the pace of new development is
slowed. Restricted supply in the face of strong demand adds upward pressure on price.
• If there is high degree of uncertainty about CAC amounts, it can impair the ability of developers to acquire
land, as buyers and sellers might make different assumptions about the amount of the CAC.
11 For example, the average annual change in the Greater Vancouver Apartment Housing Price Index published by the Canadian
Real Estate Association for the period December 2012 to December 2017 was 12.3% per year, while the average annual change in the Apartment Building Construction Cost Index for the Vancouver Census Metropolitan Area published by Statistics Canada was about 2.3% per year over a similar time frame.
12 A typical rejoinder to this is “then why aren’t prices falling?”. The answer is that downward pressure in a rising market can
mean prices are still rising but not as fast as they would be in the absence of the new supply. The fact that prices are still rising does not mean that CACs are causing a problem; it could just mean that the total growth in supply is still not enough to actually move price down.
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• If there is inadequate transparency about how CACs are determined, the community may perceive that
developers are getting too much for too little, resulting in opposition to projects.
Another important point about CACs is that local governments and citizens sometimes overestimate the value
of additional density in their communities. The value of density is essentially the value of land, when
expressed in dollars per square foot of developable area. Density is more valuable where land values are
higher, so the ability to achieve public benefits from new density is much lower in (say) Maple Ridge than
(say) West Vancouver.
The value of extra density can even vary widely from project to project within the same neighbourhood. This
can happen because:
• Some sites have views, better access, or other features that will command higher prices.
• Some sites are occupied by existing uses that support a high land value (e.g. a group of single detached
houses or a shopping plaza). It may be that redevelopment under existing zoning does not support
enough land value to make these viable development sites (i.e. the market values them as holding
properties). In order to stimulate redevelopment, some additional density must be provided at no cost in
order to support enough land value to outcompete the existing use. Only density above this
redevelopment threshold could support the provision of a CAC.
• New density for rental housing is worth considerably less in this region than new density for strata
residential. Municipalities cannot expect the same public benefit contributions (if any) from new rental
that they would get from new strata density.
• The high cost and long time frame for many rezoning processes can reduce the value of the extra density
that comes out at the end of the process.
• Higher construction costs, sustainability and green building requirements, rental replacement policies (for
sites that have existing rental stock), off-site engineering requirements, and other costs can all reduce
the value of extra density.
A final important point is the implications of not seeking CACs at rezoning.
The land market is extremely good (and fast) at capitalizing development opportunity into land values. If the
market perceives that extra density is forthcoming without any requirement of CAC, then the value of this
extra density becomes part of the value of development sites. One might wish that not charging a CAC would
reduce development costs, leading to lower house prices. In fact, not charging a CAC enables developers in
a competitive market to bid up the price of land for which density increase is expected. Housing prices would
be unaffected, developer profits would be unaffected (except for those who bought land before the new
density was a possibility), and land lift that could otherwise have been channeled to amenities or affordable
housing will flow to land owners.
Improving Density Bonus and CAC Approaches
This section of the report now turns to how these zoning-based tools might be better used to achieve
affordable housing benefits.
It is beyond the scope of this report to make detailed suggestions about every Metro Vancouver municipality’s
use of density bonusing or CACs. Based on long experience with working with many Councils, planning
departments, and developers, though, some general suggestions for using density bonusing and rezoning as
means to facilitate the construction of more rental housing are provided.
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Density bonusing and rezoning are the primary means to create additional capacity for housing construction.
There are two ways that extra density can lead to more capacity for housing:
• There is an obvious increase in the physical capacity for housing when density is increased.
• The addition of new density can cause properties that are not currently viable for redevelopment to
become so13.
To aid in creating more affordable rental housing, extra density must be used in one of these ways:
• The extra density can be used for strata housing, to create new land value. Some of this new value can
fund affordable housing provided by the developer (on site, off site, or cash-in-lieu).
• The extra density can be restricted to rental housing, in which case the new density has less (or no) value
but it gives the developer the opportunity to construct rental housing without having to acquire land. The
rents in such housing must be financially viable, meaning that some of the units will have to be at market
rent, but it is not difficult to analyze the financial performance of the rental housing to find the mix of
market and non-market rents that produces the maximum number of affordable units in a financially viable
project. As shown in Exhibits 1 and 2, the private and non-profit sectors both have breakeven rents below
which rental housing must be subsidized, even if land cost is zero. These breakeven rents are averages,
so if the average required is say 80% of market value, this can be achieved by a mix of half of the units
at 100% of market value and half of the units at 60% of market value. Adding more density can increase
the number of affordable units as long as the required breakeven average rent is achieved. Where market
rents are not sufficient to make new development feasible, adding density does not help and having a
mix of market and below-market units makes the numbers worse.
Using extra density in this way means that there will be less revenue for other kinds of amenities (e.g. child
care, community facilities). There is a trade-off that local governments must make between using the value
of new density to support affordable housing, other community amenities, or some combination.
The value of extra density is higher when the cost of rezoning is lower. If rezoning and negotiations are time-
consuming, costly, and risk,y then the realized value of affordable housing or amenities will be reduced.
Municipalities can achieve better outcomes if approvals processes are expeditious, if community plans clearly
designate locations where redevelopment is desirable and supported, and if the demands on new projects
(in terms of design features, community engagement, sustainability requirements, and other requirements)
take into account the impact on project feasibility, timing, and cost. Private and non-profit developers in this
13 This point is important and worth explaining in detail. If a property is more valuable in its current use (e.g. older single detached
housing or older commercial space) than as a redevelopment site, then the property is a holding property and its zoned capacity cannot be accessed by new development. To tip the balance in favour of redevelopment, it can be necessary to add density without expecting an amenity contribution. This can be illustrated with a simple example. Suppose a potential redevelopment site has an area of 25,000 square feet and is occupied by 5 houses on 5 single detached lots. Suppose these houses have a market value as single detached homes of $1.5 million on average, so $7.5 million in total value. Now suppose the land is currently zoned to allow multifamily development at FSR 2 and that multifamily development sites values are about $125 per square foot of buildable area for strata residential in this location. This means a strata multifamily developer could pay at most about $6,250,000 (25,000 square feet of site times FSR 2 times $125) for this as a redevelopment site. This is less than the value as single detached homes, so this land is likely to remain in its current use. To shift this property to being a redevelopment site, additional density is needed. To reach the $7.5 million supported by the existing single detached use, the site needs a density for strata of FSR 2.4 ($7.5 million in target value divided by $125 per square foot buildable means that the redevelopment needs 60,000 square feet of building area; 60,000 square feet of space divided by 25,000 square feet of site yields FSR 2.4). If the area is regarded as suitable for development to say FSR 2.7, which is achievable in wood frame in a 5 or 6 storey building, and if the aim is to have this site immediately financially viable for redevelopment, then a rezoning to FSR 2.7 would have to provide the first 0.4 FSR (from 2.0 to 2.4) of density for strata at no cost and the balance of 0.3 FSR (from 2.4 to 2.7) could be provided in exchange for an amenity contribution if the density is used for strata.
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region identify the cost and complexity of local government approvals processes as impediments that slow
the pace of new supply and that result in some projects not proceeding.
There are several ways in which density bonusing and the rezoning process could be improved to support
the creation of more rental units and to increase the pace at which they are developed:
1. Support the construction of more housing in general and more rental in particular. There are
commentators who say that the solution to housing affordability is not increased supply and that more
rezoning is not needed; they note that housing supply has been increasing and that prices are still going
up anyway. They also note that non-local demand has helped to drive housing prices up and that non-
local demand could be almost unlimited in a world with mobile capital and a rising middle class in large
nations. These observations are partly correct. Non-local investment has added momentum to house
sales prices but does not significantly affect the rental market. In the rental market, the primary solution
to reducing vacancy and reducing rent growth is the creation of more rental housing. There is existing
zoned capacity to accommodate a large increase in units, but this capacity is generally priced based on
strata potential or based on the value of existing land uses (e.g. single detached homes or older
commercial space), so it is not available for rental housing. The most important policy refinement needed
is to identify good locations for density increases to accommodate more housing, to use density bonusing
or negotiated amenity contributions to make some of this new density available for rental housing, and to
help increase the pace of new development.
2. More advance planning and faster approvals to for new housing development. Assuming that the
locations for more density and redevelopment are chosen based on rigorous and consultative planning
processes, then density bonus or rezoning can occur with less debate and delay for each development
proposal. Area-wide rezoning to allow density bonus requires advance planning to set important
development parameters such as uses, density, heights, parking requirements, and others. It is not good
practice to approve high density just because it could yield more benefits, if the density is not appropriate
based on other criteria such as community acceptability, urban design, transportation demand,
infrastructure, amenities, and services. However, it is also possible to aim too low for the density of new
urban development locations. Municipalities that place a high priority on accommodating more affordable
rental housing will have to accept that this requires a significant increase in the supply of new units. With
the limited land base in Metro Vancouver, new supply requires the designation of lands for higher density,
preferably in locations with existing or planned frequent transit service. Rezoning decisions are usually
easier when they are occurring in the context of a community plan. A plan that sets out long range policy
for uses, heights, and densities in an urban node provides the context for individual rezonings, so that
each project does not have to start from scratch in coming up with an appropriate development concept.
Investments in community plans will pay off in the form of faster approvals, more transparent decisions,
and ultimately more public benefits
3. Clearly defined priorities for public benefits. Municipalities should go through a robust process to
determine their priorities for affordable housing and other amenities before trying to implement density
bonusing or amenity contribution policy. Delays or debates within city hall on a case-by-case about what
benefits to seek will delay approvals processes, add to cost (which reduces the potential for benefits),
and delay the delivery of new units to the market.
4. Clearly defined affordable housing priorities. “Affordable housing” is not a standardized term.
Municipalities wanting to achieve affordable housing using zoning tools must decide on the relative
importance of (for example) seniors housing, housing aimed at parts of the workforce, housing for very
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low income groups, or other segments of the community. Different forms of affordable housing will have
different impacts on project economics. For example, requiring a portion of units to be market rental will
typically yield more units than requiring units to be turnkeyed to a municipality or non-profit at no cost.
These priorities should be settled by policy in advance, not worked out during the approvals process for
individual projects.
5. Ensuring Project Viability. Every development project seeking additional density has a finite ability to
provide public benefits in the form of affordable housing, amenities, contributions to infrastructure, public
art, sustainability, or cash-in-lieu. Local governments need to understand the limits on providing public
benefits in order to make sure that new development remains financially viable.
6. Practical expectations for the delivery, ownership, and operation of rental units. Municipalities
should consider their options for the delivery of affordable housing. There are four considerations:
• Units or Cash-In-Lieu. If the value of the agreed-on affordable housing contribution only supports a
few units (because the total project and/or the total increase in density are small), it is important to
consider whether it is better to have small groups of units scattered across multiple projects (which
has operational challenges and costs) or to take cash to consolidate affordable units in stand-alone
projects.
• Off-site or On-site. There could be advantages in allowing developers to meet their obligations off-
site, to take advantage of lower cost wood frame construction, lower value land, or consolidation into
stand-alone projects.
• Single or Mixed Tenure. Incorporating affordable rental units into a predominantly strata project can
create operational challenges for the strata and the rental. There are advantages to keeping rental
units in all-rental projects.
• Ownership. In some projects it is expected that affordable units be turnkeyed to a non-profit or the
municipality. There may be financial advantages to allowing developers to retain ownership of the
units (although there may be offsetting operational disadvantages).
Part 4 of this report provides more detail on these considerations.
3.3 Zoning for Residential Rental Tenure
In 2018, the Province of BC amended the Local Government Act to allow municipalities to zone land for
residential use based on tenure.
Section 481.1 of the Local Government Act states that zoning “…may limit the form of tenure to residential
rental tenure within a zone or part of a zone” where multifamily residential use is permitted. This is not an
entirely new ability. Municipalities can enter into housing agreements as part of a density bonus bylaw or a
negotiated rezoning, to require that a project provides affordable housing units that are rental. Housing
agreements can even specify a required rent structure, which the new rental zoning cannot. The new
legislation allows the zoning of a property for rental, but this zoning cannot on its own dictate rents, so projects
zoned in this way are likely to be market rental.
Because this rental legislation is new, it is in use (as of the date of this report) in only two locations in Metro
Vancouver. Burnaby has amended its zoning bylaw in anticipation of applying rental zoning, but it has not
applied the new zoning districts to any sites and is working on a strategy for implementing the zoning. New
Westminster has adopted a bylaw to rezone to rental some older, strata titled buildings that have operated
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for decades as rental housing. There was strong opposition from some parts of the development community
and strong support from rental housing advocates.
Because of the wording in the legislation (“within a zone or part of a zone”), rental zoning could be introduced
in several different ways:
• An existing zoning district could be modified to rental with no other changes. So, the allowable uses,
heights, density, and other regulations would stay the same but the tenure would be restricted to rental
(with no ability to regulate rents or target clients). This zoning could be applied to an existing rental
building to protect existing stock from redevelopment, or it could be applied to a potential development
site so that the any new development is rental housing.
• A property could be rezoned to allow higher density than currently allowed, but with the condition that all
the density be rental.
• A property could be rezoned to allow higher density than currently allowed, with some of the density (the
original density for example) remaining unrestricted and some of the density (the new density for
example) being restricted to rental.
These different approaches have very different implications for how the zoning would affect land values, the
viability of redevelopment, and the operation of the rental housing.
Because rental zoning has the potential to significantly change the economics of redevelopment, it is
important to examine carefully its potential impacts.
To show the nature of the impacts, three case study locations have been used (Burnaby Metrotown, Surrey
City Centre, and Maple Ridge). The case study locations are hypothetical potential multifamily development
sites (i.e. not actual sites) that are typical of the respective communities. The analysis uses physical
development concepts, costs, prices, and other variables appropriate to each location.
Each case study was modelled under a variety of different scenarios to show how a new development would
perform under differing assumptions about the value of the site, the form of construction (wood frame versus
concrete), and the density of redevelopment.
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3.3.1 Burnaby Metrotown
This case study is summarized in Exhibit 4. The detailed financial analysis is in Appendix 5.
The case study proceeds in this sequence of steps:
1. The first step is to estimate the property value supported by the typical existing uses on potential
redevelopment sites. As shown in Exhibit 4, older low density commercial or older low density residential
use might typically support a value in the range of $11.6 to $17.1 million to an investor intending to hold
this property as an income-producing asset.
2. The second step is to estimate the amount a developer could pay for the site assuming it is zoned RM3s
allowing FSR 1.5. This density is used because some properties in the area are designated for this
density, which is achievable in wood frame. As shown in Exhibit 4, the developer can pay about $11
million for this site. This means this property may not be a redevelopment candidate at this density,
because the developer cannot match the value supported by the existing use (which explains why few
projects proceed at this low redevelopment density).
3. If the site is zoned rental at FSR 1.5, with market rents, and assuming no CAC, the most that can be paid
for the site is $9.5 to $9.8 million. So, rezoning this to rental without adding more density means this
property will probably remain in its existing use. This is an acceptable outcome if the site is occupied by
older rental housing and the intent is to retain the existing stock, but not acceptable if the intent is to have
older, low density commercial or residential properties redevelop to create more units at a transit-served
location.
4. If the site is rezoned to allow RM5s at FSR 5.3, the site (after CACs) would be worth nearly $50 million.
But if zoned for this density as rental, the value would be under $10 million, again less than the value of
the existing use.
5. The analysis also tests how much extra density would have to be added so that rental zoning on the
whole density would generate enough land value to surpass the value of the existing use. Assuming the
project is wood frame, rental works if the site is rezoned to somewhere in the range of FSR 1.8 to 2.4.
This means that rental zoning combined with an increase in density could work, if the aim is to generate
enough land value to compete this site away from its existing use. But if the goal is to achieve the higher
density that is typical in Metrotown and that requires concrete construction, the density of rental housing
would have to be much higher, at FSR 7.7 to 11.0 to match the property value supported by the existing
use. If the site is assumed to be developable as RM5s in strata concrete at FSR 5.3, it is not physically
feasible to put enough density on the site to allow rental to match the land value supported by strata
development.
This analysis for Metrotown shows that:
• Applying rental zoning to existing rental residential properties or existing low density commercial,
without adding any new density, risks making these holding properties rather than rental development
sites at the higher densities anticipated in the Metrotown plan. If the intent is to maintain the existing
use (e.g. retain the existing older rental stock), then this may be a desirable outcome, but if the intent
is to fully utilize Metrotown’s potential for high density development with rapid transit access then
rental zoning would impair that. The problem is that rental zoning can eliminate the competition from
strata land values, but in most cases it will not generate enough land value to outcompete the
continued existence of the current use.
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• Applying rental zoning and adding density (with all density having to be rental) can work for some
sites that are preferred to redevelop as low density wood frame, provided that density is allowed to
increase to the upper limit of what is physically achievable in wood frame construction. For concrete
construction, the rental density increases must be very large to make the site valuable enough to
outcompete the existing use.
Exhibit 4: Summary of Metrotown Case Study
Site Size 55,000 sq.ft.
Existing use Older Rental Residential
FSR 0.9
Older Commercial
FSR 0.4
Property value of existing use $17.1 million1 $11.6 million2
Land value if rezoned to RM3s, FSR 1.5, strata $11.0 to $11.2 million3
Land value if rezoned to rental only, FSR 1.5, wood, no
CAC
$9.6 to $9.8 million4
Land value if rezoned to RM5s, FSR 5.3, Strata $49 million5
Land value if rezoned to rental only, FSR 5.3, concrete,
no CAC
$9.4 to $9.6 million6
Estimated total rental density needed to support land
value equal to existing use, no CAC, wood
1.8 to 2.4 FSR7
Total rental density needed to support land value equal
to existing use, no CAC, concrete
7.7 to 11.0 FSR8
Exhibit 4 Notes:
1. See Appendix 5, Exhibit 2. 2. See Appendix 5, Exhibit 1. 3. See Appendix 5, Exhibit 3. The range is due to tenant compensation, if existing use is rental residential. 4. See Appendix 5, Exhibit 4. The range is due to tenant compensation, if existing use is rental residential. 5. See Appendix 5, Exhibit 5. This figure is rounded. 6. See Appendix 5, Exhibit 6. The range is due to tenant compensation, if existing use is rental residential. 7. The lower density is needed if the site is occupied by commercial and the higher density is needed if the site is occupied by rental
residential. 8. See note 7.
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3.3.2 Surrey City Centre
This case study is summarized in Exhibit 5. The detailed analysis is in Appendix 6.
Potential multifamily residential development sites in this area are typically occupied by older rental housing
at low density, older single detached homes, or older low density commercial use. These different uses
indicate a range of $5.0 million to $8.5 million for a site of 45,000 square feet, depending on its current use.
If rezoned to allow low-rise, wood frame, mixed use strata development at FSR 2.5, the supportable land
value is as low as $2.7 million if the site is occupied by older rental that must (pursuant to City policy) be
replaced and as high as $8.3 million if the site is occupied by commercial or single detached use. So, whether
or not this is a viable development site at low density depends on existing use.
Rezoning the site to rental is financially viable in wood frame at FSR 2.5, but it only supports a land value of
up to $4.2 million (and less if rental unit replacement is required), which is less than the value supported by
the existing uses of the land. Such rezoning would remove these sites as redevelopment candidates.
If rezoned to allow high density residential (strata), the site is worth $7.4 million (if it must absorb the rental
replacement cost) to $17 million (if there is no existing rental housing). Rental replacement policy here has
the effect of reducing the number of potential redevelopment sites (which may be the objective, to retain
existing older stock).
Rezoning to rental at a density that requires concrete construction is not financially viable and increasing
density beyond current zoning/policy won’t help because the cost of concrete construction is too high to be
justified by market rents even with no land value
Exhibit 5: Summary of Surrey City Centre Case Study
Site Size 45,000 sq.ft.
Existing use Older Rental
Residential
FSR 0.8
Older
Commercial
FSR 0.4
Single Detached
Assembly
Property value of existing use $8.0 million1 $8.5 million2 $5.0 million3
Land value if rezoned to FSR 2.5, strata $2.7 million4 to $8.3 million5
Land value if rezoned to rental only, FSR 2.5 -$2.0 million6 to $4.2 million7
Land value if rezoned to FSR 7.5, strata $7.4 million8 to $17.0 million9
Land value if rezoned to rental only, FSR 7.5 Negative (not financially viable)10
Additional rental density needed to support
land value equal to existing use
Not viable even with extra density
Exhibit 5 Notes:
1. See Appendix 6, Exhibit 2. 2. See Appendix 6, Exhibit 1. 3. See Appendix 6, Exhibit 3. 4. See Appendix 6, Exhibit 6. The large range is due to the City’s rental replacement policy, if existing use is rental residential. 5. See Appendix 6, Exhibit 4. 6. See Appendix 6, Exhibit 7. 7. See Appendix 6, Exhibit 5. The large range is due to the City’s rental replacement policy, if existing use is rental residential. 8. See Appendix 6, Exhibit 10. 9. See Appendix 6, Exhibit 8. The large range is due to the City’s rental replacement policy, if existing use is rental residential. 10. See Appendix 6, Exhibits 9 and 11.
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3.3.3 Maple Ridge
This case study is summarized in Exhibit 6. The detailed analysis is in Appendix 7.
This case study uses a smaller assumed site size than the others, because development sites (and projects)
tend to be smaller in this community.
Existing uses in the town centre area tend to be older rental housing, older single detached houses, or older
commercial buildings. These support land values (for the 15,000 square foot site) of around $1.4 million to
$1.7 million.
Redevelopment to mixed use strata under existing zoning at FSR 2.3 is viable in wood frame construction
and supports a land value of just over $2.0 million, so redevelopment is likely. However, redevelopment to
higher density strata in concrete is not viable.
Rezoning to rental in wood frame (FSR 2.3) is financially viable, except it does not support enough land value
to out-bid existing uses, so redevelopment candidates would shift to holding property in their existing use.
Rezoning to rental in concrete is not viable even if land is free.
It is not feasible to add enough density to rental to generate enough land value to compete sites away from
existing use; in wood frame the required density would not be physically possible and concrete is not viable
at any density.
Exhibit 6: Summary for Maple Ridge Case Study
Site Size 15,000 sq.ft.
Existing use Older Rental
Residential
FSR 0.9
Older
Commercial
FSR 0.4
Single Detached
Assembly
Property value of existing use $1.4 million1 $1.7 million2 $1.4 million3
Land value if developed as FSR 2.3, strata $2.2 million4
Land value if rezoned to rental only, FSR 2.3,
no CAC
$0.4 million5
Land value if rezoned to FSR 4.0, strata Negative (not financially viable)6
Land value if rezoned to rental only, FSR 4.0 Negative (not financially viable)
Additional rental density needed to support
land value equal to existing use
Not viable not even with extra density
Exhibit 6 Notes:
1. See Appendix 7, Exhibit 2. 2. See Appendix 7, Exhibit 1. 3. See Appendix 7, Exhibit 3. 4. See Appendix 7, Exhibit 4. 5. See Appendix 7, Exhibit 5. 6. See Appendix 7, Exhibit 6.
3.3.4 Implications for Rental Tenure Zoning
Rental tenure zoning can be effective at preventing redevelopment of existing rental housing properties,
because it effectively downzones (and devalues) these properties by eliminating the option of strata
development.
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In most cases, rental zoning will not contribute to the creation of new rental housing. In urban, developed
areas this type of zoning without density increases would probably just shift properties from being
redevelopment candidates to being holding properties.
Rental tenure zoning might be effective in these cases:
• Vacant land that would otherwise have been strata (although this is a downzoning and would likely
encounter significant opposition).
• Lands transitioning from institutional to residential, to ensure rental use (although this can be achieved
via housing agreement).
3.4 Inclusionary Affordable Housing Requirements
Inclusionary housing in the broadest sense means requiring that new residential projects must include a
specified number of affordable units, with a clear definition of affordability.
Inclusionary housing zones could be thought of in two categories:
• Zones that require the inclusion of a mix of unit types. Market rental residential projects tend to include
mainly smaller units (studio, 1 BR, 2BR) because these generate the most income. However, small units
do not meet the needs of households with children, so some types of zoning can require that a portion of
new units be family oriented (larger 2BR and 3BR).
• Zones that require the inclusion of a proportion of units that are affordable for households at defined
income targets. This is the kind of zoning that is most often referred to as inclusionary zoning. This type
of zoning has existed for decades in some parts of the United States, where it was used to countervail
zoning that was designed to exclude housing types and densities that would be affordable. In other
places, inclusionary zoning is a new tool intended to require the incorporation of affordable units in new
projects.
While municipalities in BC have recently been given the power to zone for rental tenure, and can use this
power to ensure that all or a portion of new development is rental housing (subject of course to the project
being financially viable and actually proceeding), they do not have the explicit authority to zone land (or units)
to control rent. If rental zoning is applied to an existing or new rental building, in the absence of some other
means of exerting control the building could be rented at market rents, which are too high to be affordable in
much of the region.
At present, the only way for municipalities in BC to require rental units at a specified rent level is pursuant to
a housing agreement negotiated with a developer as part of a rezoning. Municipalities can specify in a density
bonus bylaw or in a site-specific negotiated package of public benefits that some units must be available at
certain rents. For a private developer to be willing to provide such units, the new density available from the
density bonus or from rezoning must be sufficient to offset the cost of providing the included affordable rental
units.
There are jurisdictions in which inclusionary housing can be mandatory without being accompanied by
additional density. For example, in 2018 legislation came into effect in Ontario that allows municipalities to
require projects of 10 or more units to include affordable units. However, the legislation recognizes the
potential for such zoning to have a negative impact on development economics so it requires that local
governments evaluate potential impacts on the housing market and the viability of projects and consider
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possible offsetting incentives. The legislation also prevents municipalities from seeking amenity contributions
from additional density used for inclusionary housing.
Before evaluating the strengths and weaknesses of inclusionary zoning, it is important to understand that, in
the absence of any offsetting incentives, it has a negative impact on the financial performance of a
development project. While the financial impact may be viewed as being offset by social benefits from
affordable housing supply, the benefits and costs accrue to different parties. A project that is not viable in
financial terms (i.e. costs exceed revenues) is not rendered financially viable just because it also generates
social or environmental benefits.
The extent of the financial impact depends on the income target (and maximum rent) that is applied to the
affordable units.
The graphs shown earlier in Exhibits 1 and 2 show the break-even rents that must be achieved by a private
developer creating new rental units under various assumptions. The graphs show that, even with land at low
or no cost, the breakeven rents are around $2,000 per month and up, which means the incomes are $80,000
and up (higher than the regional median household income). Units that must be rented for less than this are
below break-even (unless there is some offset), which has the following possible impacts on the project:
• Total net income from the project is reduced, so it does not generate enough profit to be viable and the
developer does not proceed.
• The amount that the developer can afford to pay for land is reduced. Inclusionary zoning without
something added to offset the impact can make it even harder for a rental project to afford to complete
land away from its existing use.
This is why Seattle and Los Angeles added new density when they introduced inclusionary zoning. They
recognized that for projects to be viable there had to be an offset to the negative impact of enforced lower
rent. To address this, they estimated the amount of additional density that would offset the income loss of the
affordable units.
In general terms, requiring some units in private sector developments to be rented at below market rent will
only work in Metro Vancouver if the requirement is bundled with density increases. This already happens in
municipalities with projects that are undergoing rezoning and that exchange density for affordable housing.
For non-profits inclusionary requirements probably don’t change project economics, because they would have
included the affordable units anyway, to the best of their ability based on their financial resources.
Inclusionary zoning that does not increase density would not be successful and would likely lead to reduced
rental development activity.
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3.5 Evaluation of the Tools and Applicability in Metro Vancouver
The approaches to addressing land availability have different degrees of applicability in different parts of
Metro Vancouver, depending on market conditions.
The table below shows which tools are likely to be most successful and which are likely to be least successful.
Approach Effectiveness Making it Work
Deployment of existing
lands owned by local
government or non-
profits
Where eliminating land cost and reducing
construction cost (e.g. reduced parking) are
enough to make new rental construction
viable at target rents, this approach is
highly effective, provided the land owner is
willing/able to forego the value of the land
or be patient with regard to return on land
value.
Experienced local governments
and non-profits know how to do
this. There are many entities
that own land but that are not
yet in the housing sector. They
need assistance to decide
whether and how to use their
lands for multiple objectives.
More partnerships between local
governments, non-profits,
developers, and BC Housing
can take advantage of these
opportunities.
Acquiring more land to
use for affordable
housing
As above, with the added constraint that
buying land requires new cash or borrowing
so it is limited by the resources of
government and non-profits.
There are creative possibilities that reduce
the need for cash or borrowing or that can
recover the investment after infrastructure
or zoning changes:
• Buying strategic parcels of land before
major area planning/rezoning
processes
• Buying extra land when preparing for
transit construction
The key requirements are:
• The ability to strategically
acquire land before events
that trigger land value gains.
• The financial resources to
buy land early.
• TransLink and local
governments are in the best
position to be more active in
land acquisition.
Rental zoning without
concurrent density
increase
If applied to existing older rental stock, this
will likely postpone redevelopment, so if the
intent is to prevent demolition this will be
effective.
If the intent is to facilitate redevelopment to
create new rental stock this will generally
be ineffective. While rental zoning
eliminates strata development as a
competing use, properties still have value in
their existing use and in most cases rental
development cannot compete with this land
value.
It is also worth noting that rental zoning
does not allow any control on rents, so any
private sector rental development that does
proceed will likely be at market rents.
See below.
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Approach Effectiveness Making it Work
rental zoning without density increase might
be effective in these cases:
• Vacant land (although this would be
regarded as a downzoning).
• Sites with very low value existing use.
• Sites transitioning to residential from a
non-residential zone (e.g. institutional),
although the rental tenure in this case
could be secured by other means.
Rental zoning with
concurrent density
increase
This has not been implemented in Metro
Vancouver, but it is possible under the
legislation.
There are two ways this could work:
• New rental density is layered onto
existing density. In this case, the
underlying density maintains land value
and the new density can be allocated to
rental.
• An entire site is zoned rental, but total
density is increased as needed to
generate enough land value to compete
the site away from its existing use. This
will work where rental development
supports some land value but will either
not work or require extremely high
density where land values are low.
The amount of extra density to
make rental zoning able to
match existing land values is
high, so there will be a challenge
finding locations where the
required extra density is
acceptable and financially
viable.
In much of the region, the best
prospects will be in locations
where extra density can be
achieved in wood frame
construction, because of its
lower cost. In practical terms,
this means a focus on frequent
transit corridors where 4, 5, and
6 storey development can
achieve densities in the FSR 2
to 3 range.
Adding density in concrete
construction will work where
rents are relatively high, but
where target rents are lower
concrete is not viable. Refer to
Exhibits 1 and 2.
Inclusionary housing
requirement without
concurrent density
increase
Existing legislation in BC does not allow
zoning on its own to specify target markets
or rents. Inclusionary requirements can be
achieved when density bonusing or
rezoning require affordable housing, which
is then governed by a housing agreement.
Revising legislation to allow zoning to
require inclusionary housing will generally
not work in all-rental projects without major
financial assistance. Rental construction at
market rents is challenging, so reducing
total rental income (the result of mandating
lower rents) just makes it harder.
Mandatory inclusion of affordable rental in
strata projects could be viable in some
See below.
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Approach Effectiveness Making it Work
locations, but this will reduce the amount
developers can pay for land and therefore
risks reducing the pace of development.
There are also challenges with integrating
rental units into strata projects.
Inclusionary housing
requirement with
concurrent density
increase
In BC, zoning on its own (even with a
density increase) cannot control rents. In
practice, though, affordable housing is
achieved in density bonusing or rezoning
via a combination of the change in zoning,
an increase in density, and a housing
agreement that governs the affordable
units. This the primary way that affordable
rental housing has been achieved by local
governments in Metro. See below.
See below.
Using rezoning tools to
obtain affordable
housing
This has been the most prevalent and
successful means to obtain affordable
housing in Metro Vancouver. This approach
harnesses the value of extra density, by
making density available at no cost for
rental housing and/or making strata density
available at market value and applying
some of the value to support affordable
housing.
This tool is applicable in every housing
submarket in the region where rezoning
and densification are appropriate.
The leverage is greatest where new rental
and strata density are created, because in
this way the rental component avoids a land
cost and the new strata land value is
applied to support the construction of the
affordable housing.
This approach is typically combined with
the use of a housing agreement which can
control the tenure of units but can also
control rents and define target renters (e.g.
household in certain income brackets).
Consequently, this approach yields more
affordable housing benefits than rental
zoning on its own.
This is already working and
there are many examples to
show how extra density creates
the financial wherewithal to
provide affordable rental
housing.
This approach could be much
more extensively and effectively
used if local governments invest
more in community planning and
rezoning to support more
density in good locations.
Advance planning, reduced
approvals risk, and financially
sound and transparent
CAC/affordable housing policy
can lead to more housing and
faster delivery.
There is a trade-off between
using density to achieve
affordable housing versus other
important community benefits
such as child care or amenities.
This trade-off should be
addressed in clear policy about
the mix and priority of different
public benefits.
This approach requires that
communities accept higher
density to accommodate
affordable housing.
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Part 4: Improving Unit Delivery
Next, the report explores the potential to improve the actual delivery of units by private sector developers and
by the public and non-profit sector. This section addresses these questions:
• Should private developer obligations for rental housing be met on site or could they be met via cash-in-
lieu or by delivering the units in other locations?
• Should affordable units developed by the private sector, pursuant to zoning requirements, be owned by
government or non-profits? Are there advantages or disadvantages to ownership by the private sector?
• What are the advantages and disadvantages of combining affordable rental units with market rental units
or strata units in the same project?
• Is there value in considering a more coordinated or centralized approach to public and non-profit sector
housing delivery, instead of the decentralized system currently in place?
4.1 Should private developer obligations for rental housing be met
on site or could they be met via cash-in-lieu or by delivering the
units in other locations?
There are two broad sets of considerations that could be applied to answer this question.
One of these could be called social. There are important questions about the extent to which market,
affordable, and non-market housing should be intermingled in a community (or even in a project). This is a
highly charged topic and terms like “poor-doors” and “ghettoes” are used to oppose the segregation of low-
cost housing from market housing. All citizens deserve respect regardless of their income and housing, so
complete isolation of lower cost housing is neither socially desirable nor politically acceptable. On the other
hand, market housing is divided into geographic submarkets so it could be argued that not every site must
include a full spectrum of housing types.
There are some financial and operational considerations in the location of affordable units:
• The ability to acquire land for affordable housing is higher in areas where land cost is lower.
• Wood frame construction costs less than concrete, so the delivery of affordable units is easier in areas
where the target density does not require concrete construction.
• Many new market projects are not large enough to provide a significant number of affordable units on
site. If (hypothetically) a 50 unit project is expected to deliver 10% of the units as affordable rental, this
creates a tiny pocket of 5 units that have different management and operations requirements than the
rest (especially if the rest of the project is strata). Non-profit and private developers alike express a
preference for physical separation of unit types because this makes housing management easier and
provides independence regarding operations, regulations, repairs, and major capital investment
decisions.
For these reasons, jurisdictions such as Seattle and Los Angeles that have mandatory affordable housing
requirements (in conjunction with density increases) allow some flexibility in how the requirement is satisfied.
The affordable units can be delivered on site, delivered in a stand-alone project in another good location, or
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delivered via cash-in-lieu (to a housing authority which pools these contributions and builds publicly owned
housing).
If an affordable housing requirement can be delivered off site (in a good location with bus service, for example)
at lower cost than in a concrete project, then more housing can be delivered for a given cost. Suppose a
market developer achieves a rezoning that carries with it a negotiated obligation to deliver $2.0 million in
affordable housing benefits. If concrete units cost $550 per square foot, this translates to around 3,600 square
feet (say 6 units at 600 square feet each). If wood frame costs $425, the same contributions translates into
about 4,700 square feet (around 8 units). This is only a two unit difference but applied to many projects it
adds up.
Local governments looking to require an affordable housing contribution from market development projects
in high density locations should consider the option of allowing developers to meet their obligations in flexible
ways (in other locations or cash-in-lieu) that produce better outcomes, in terms of more units and/or better
configurations for operating the affordable housing.
4.2 Should affordable units developed by the private sector,
pursuant to rezoning requirements, be owned by government or
non-profits? Are there advantages or disadvantages to
ownership by the private sector?
The non-profit sector generally perceives that it is better for affordable units to be owned or at least operated
by non-profits. The reasons for this include:
• Control over tenant selection.
• Control over maintenance standards.
• Commitment to maximizing affordability beyond the “letter of the law” in housing agreements or
covenants, with possibly less cost for monitoring and enforcement than might be needed with private
sector owners/managers.
• The ability to build up a portfolio of owned assets, which permits cross-financing, cross subsidization, and
reduced reliance on grants or subsidies.
These benefits come at a cost, though. There is value in looking at the financial outcomes of different
approaches.
Suppose a developer has an obligation to deliver affordable units as part of a negotiated rezoning package.
In the first scenario, assume that the local government requires that the units be turnkeyed at no cost to the
local government or to a non-profit. Using an example of a two bedroom, 800 square foot unit at $550 per
square foot (hard and soft construction cost, no profit, no land), this represents a cost to the developer of
$440,000 for each unit with no offsetting value from the unit.
Now, in a second scenario assume that the developer can retain ownership (and therefore the rent income)
of the unit, but with restrictions on rent.
Exhibit 7 shows the financial implications of this approach compared to the turnkey approach.
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Exhibit 7: Turnkey Versus Developer Ownership
Household
income
target
Monthly
rent
Net
operating
income
after
expenses
of $5,500
per year Cap rate
Implied
value of
the rental
unit
Construction
cost
Net cost to
developer
per unit
Number
of units
that can
be
provided
for
$440,000
$60,000 $1,500 $12,500 4% $312,500 $440,000 $127,500 3.5
$35,000 $875 $5,000 4% $125,000 $440,000 $315,000 1.4
As shown, rather than deliver one unit on a turnkey basis, this developer would be willing to deliver 1.4 units
if the rent is geared to a $35,000 income and 3.5 units if the rent is geared to a $60,000 income.
This alternative approach requires that there are mechanisms in place to ensure that the income/rent
requirements are adhered to, but it shows the potential to deliver more units if the private sector can retain
ownership.
Another way to achieve a similar outcome is to have the units sold by the developer to the local government
or non-profit at less than construction cost but not for free. In Exhibit 7, if the units are purchased at $312,500
or $125,000, then the same multiplier effects can be achieved. This of course means that the local
government or non-profit must have access to equity or borrowing (which can be repaid using the rental
income) to enable the purchase.
4.3 What are the advantages and disadvantages of combining
affordable rental units with market rental units or strata units in
the same project?
While there are social planning arguments in favour of mixing incomes and tenures, it is interesting that there
is almost universal preference among private developers and non-profit developers for creating stand-alone
projects. This section examines two combinations: affordable rental/market rental and affordable
rental/market strata.
Affordable Rental/Market Rental
There are two different ways this combination can be structured:
• One owner with different categories of units.
• Separate owners (via volumetric or air parcel subdivision) of the affordable and market rental
components.
Single ownership is a relatively easy model because one party is responsible for property management,
tenanting, rent setting, rent collection, and so on. Non-profits take the view that they are skilled at this and
that they have “mission alignment” in the sense that their priority is maximizing affordability. They express
concern that developers will seek ways to circumvent the rent controls; not surprisingly, some developers
take umbrage at this view and believe they are just as capable as the non-markets at managing rents.
Interestingly, in the Seattle and Los Angeles case studies, the private sector develops almost all the affordable
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units within projects and these units remain owned and operated by the private sector. The owners are bound
by covenant to maintain the agreed-on rent structure.
Regardless of who owns/operates the building, the private and non-profit sectors agree that single ownership
is better than mixed.
Separate ownership of the affordable and market rental components in the same building, by way of a
volumetric subdivision, means that each party is bound forever to a partner that will have different resources
and priorities. This can create challenges for decisions about maintenance, major capital repairs, or
(eventually) redevelopment. Private and non-profit developers have the same discomfort with this model.
Affordable Rental and Strata
This model can be achieved in two different ways:
• The project could involve volumetric subdivision (into one parcel that is the strata project and one that is
the rental project). This has the same challenges outlined above and the added difficulty that it could
impair the marketability of the strata units.
• Alternatively, the affordable rental units could be strata units (part of the strata corporation) that are owned
by an entity that must rent them out in accordance with an agreed rent structure. This entity could be the
original developer, an investor, or a non-profit entity.
In either case, there are practical challenges with this approach:
• It is possible that the different owners have different expectations and priorities about standards of
maintenance.
• Depending on the nature of the common areas in the project, there could be higher than typical operating
costs for amenities that are hard for the rental component to absorb.
• Depending on the target market for the affordable units, there could be concerns (rightly or not) on the
part of strata owners about the profile of the rental occupants.
• If the rate of turnover is higher in the rental portion, there will be conflicts about wear-and-tear that could
affect strata fees.
For these reasons, the private sector and the non-profit sector generally express a preference for stand-
alone, single ownership buildings that do not mix strata and rental tenures. They can be on the same site,
but in distinct buildings.
4.4 Is there value in considering a more coordinated or centralized
approach to public and non-profit sector housing delivery,
instead of the decentralized system currently in place?
This question is akin to asking whether there would be efficiencies in consolidating Metro Vancouver’s two
dozen municipalities into a single local government. One can be pilloried for even asking, and the answer
(whether yes or no) is sure to bring even harsher punishment from some quarters.
The current landscape can be summarized this way:
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• Every local government in the region has a different approach to addressing housing affordability. Even
municipalities that are using the same basic tools have different requirements and approvals processes.
• There is a wide array of non-profit entities involved in delivering affordable housing. These include faith-
based groups, service clubs, charities, and development companies structured on a not-for-profit basis.
• Different levels of government are involved in developing, owning, and operating affordable housing. The
Federal Government, Provincial Government, Metro Vancouver, and some local governments all have
inventories of units.
• Funding and technical assistance are available from senior governments, local governments,
consultants, and some financial institutions that support social-purpose housing development.
Is this complex? Very. Are there inefficiencies? Obviously. Are there extra costs? Yes. Is there any likelihood
that this will be changed in a material way in the near future? Not likely, as all these entities have different
priorities, different resources, established mandates, established programs, and a degree of autonomy they
are unlikely to relinquish.
The useful question to ask is not whether the whole current system of delivering affordable housing should
change, but rather are there practical ways to improve the current situation through greater coordination
among the various entities involved in affordable housing delivery and through making resources available to
enable existing entities to do more.
Here are a few suggestions:
• Local governments could explore ways to make approvals processes somewhat more consistent so that
private developers and non-profits can more easily understand the rules. Considering that all Metro
Vancouver municipalities (except the City of Vancouver) operate under the same legislative framework
of the Local Government Act and the Community Charter, it is surprising how different their development
approvals processes and requirements are.
• In a similar vein, it would be helpful to agree on some terms across the region with regard to housing
affordability. Private and non-profit developers must sort through the nuances of “affordable”, “social”,
“non-market”, “below market”, “market”, “HILS”, and other terms to figure out what kinds of affordable
rental are going to be included in redevelopment projects.
• There is value in a one-stop resource centre for non-profits, with a mandate for outreach to non-profits
that have land but are not yet involved in housing and with a budget to help non-profits in the challenging
early days of a project idea. The Housing Hub operated by BC Housing is a good resource for technical
assistance and funding. However, some of the target non-profit entities are not likely to seek assistance
as they do not see themselves as housing providers. There is a need for an aggressive outreach to bring
more land into affordable housing development, along with technical and financial assistance to help
create new project opportunities on non-traditional sites.
• There would be value in earlier, stronger, and lasting coordination between local governments and
TransLink regarding the timing and alignment of major transit investment. The uncertainty of
whether/when the Broadway extension will go all the way to UBC means that opportunities for strategic
public land acquisition have been reduced by early private land assembly. The proposed revision to the
alignment of transit in Surrey shows that early strategic land acquisition can be risky without continued
commitment to transit alignment and design decisions once they are made.
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• There would be value in greater coordination between TransLink and other entities that own any of the
land used for rapid transit guideways, to make surplus lands available for development.
• As more affordable units are developed, by a wider variety of private and non-profit entities, it will be
important to maintain a regional inventory of these units so that housing planners understand the total
number, type, and affordability of the stock. This will be useful in evaluating progress for total unit
creation.
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Part 5: Integrated Planning for Transit and Affordable
Housing
Metro Vancouver, local governments, and TransLink already invest considerable effort in coordinating land
use and transportation planning with generally good result. The distribution of areas designated for high
density residential and commercial development closely matches the intensity of transit service, because
most of the development nodes are either older concentrations (such as New Westminster or Lower
Lonsdale) that determined the transit alignment or new nodes that were planned on existing or proposed
rapid transit lines (such as Cambie Corridor, Metrotown, Surrey City Centre, Coquitlam Town Centre, and
Richmond Town Centre).
Plans for the next phases of rapid transit extension are underway and there are concurrent efforts to plan for
new development, although changes to the transit plans for Surrey and the ongoing discussions about
whether or how to extend the Broadway extension to UBC are adding complexity and creating uncertainty.
However, integration with land use planning is not the same as planning for affordable housing that is served
by transit. Based on the analysis in this report, there are ways in which the development/transit planning
process could be improved in order to help create more affordable housing supply.
Looking Beyond Rapid Transit Stations
With few exceptions, rapid transit stations that are the focus of higher density redevelopment are planned for
high density that requires concrete construction. This has the advantage of accommodating large amounts
of residential and commercial floor space within easy walking distance of the station, but it has the
disadvantage of high construction cost.
Wood frame is a lower cost form of construction and areas designated for low to medium density tend to have
lower land values. For this reason, it may be possible to deliver more affordable transit-oriented units in
locations that are not at rapid transit stations. There are two kinds of locations where this is possible:
• In the shoulder areas of rapid transit station planning areas. As a transition from a very high density core
area to a lower density context, areas can be designated for medium density multifamily that uses wood
frame construction. These may be in the 5 to 10 minute walk radius rather than the 0 to 5 minute radius.
One implication of this approach is that requirements for affordable housing that are created via rezoning
in the higher density core could be satisfied by creating affordable units in the surrounding area.
• Along frequent transit corridors with good bus service. There are many corridors in the region along
arterials with good bus service that will not become rapid transit corridors. Some of these corridors are
designated for high density that needs concrete construction, but there are many that are designated for
densities that are viable in wood frame construction. These densities could be increased if heights are
increased from the typical 4 storeys to 5 or 6 storeys. These are locations where affordable housing
obligations created by rezonings in very high density nodes could be satisfied at lower cost (meaning
more units for a given investment).
Strategic Land Acquisition and Development Planning
Seattle and Los Angeles are examples of metropolitan transit authorities that have taken a stronger role in
affordable housing by revising their approach to land acquisition and disposition:
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• Rather than only buying the minimum needed for transit construction, they are buying enough to ensure
that post construction there will be development opportunities.
• They are locating transit stations with an eye to maximizing development potential, in addition to meeting
transit requirements.
• They are being creative about using air parcels above transit infrastructure to accommodate urban
development.
• They are acquiring land as early as possible to benefit from land lift.
• They are making some of the surplus land available at less than market value in order to facilitate
affordable housing.
There is potential in Metro Vancouver to adopt these strategies, both for new land acquisition and transit
construction and for the creative use of existing rapid transit rights of way.
In most cases, incorporating residential development into or beside transit infrastructure will require the use
of volumetric (air parcel) subdivision. Such subdivisions are more complex than traditional two-dimensional
parcel creation, but there are many examples in the region and in other jurisdictions. Zoning and tenure (strata
versus rental) are not different for volumetric parcels. Construction and property management can be more
complex.
Taking advantage of these opportunities involves these approaches:
• TransLink can take a larger role in strategic land acquisition to support urban development, including
affordable housing. Most future land acquisition opportunities will be at rapid transit stations, which are
likely to be planned for high density requiring concrete construction. The construction cost will make it
difficult to provide affordable housing on its own, but there will be opportunities to create a mix of housing
with strata or market rental helping to support affordable rental. The aim would be to achieve multiple
objectives: create opportunities to increase the total housing supply at stations, generate revenue that
helps pay for transit, and facilitate some affordable housing. TransLink does not have a mandate to
subsidize the creation of affordable housing, but it is possible that early land acquisition creates the ability
to enjoy lift in land value and to allocate some of the gain to transit infrastructure and some to affordable
housing.
• TransLink can achieve revenue generation and support for affordable housing in the disposition and
development of its surplus lands.
• Transit infrastructure can be designed to accommodate adjacent and vertical urban development. Again,
this necessarily involves concrete construction but this does not preclude the potential for some
affordable housing as part of a financially viable mixed use project that returns some land value to
TransLink.
• There can be greater coordination between local government land use planning and transit station design
to create development opportunities. The Canada Line station at Broadway and Cambie is an excellent
example of not taking advantage of the ability to integrate urban development and station construction,
but fortunately it is an excellent opportunity for another try when the Broadway extension of the Millennium
Line is built and creates a major transfer point at this location.
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• Coordination between landowners where TransLink and other government entities such as the Province
and BC Hydro) have an interest in land occupied by transit infrastructure.
Early Planning for Affordable Housing
Integrated planning for transit and land use in transit-oriented areas should plan for affordable housing from
the beginning. Because affordable rental housing cannot support land value, it is essential that plans for
residential densification define early goals for the mix of market and affordable housing and early strategies
for how affordable housing can be achieved. This requires signals not just about how much density is planned,
but also the conditions under which additional density will be available, the anticipated mix of market rental,
affordable rental, and strata housing, and the implementation plan for the affordable rental component. If
these goals are defined early, the land market and the private sector development industry are more able to
respond appropriately and the capacity for affordable rental housing can be created. This integrated planning
should include early identification of lands owned by the public sector or by non-profits that could be good
sites for additional density for affordable rental housing in transit-oriented locations.
This early planning should not only consider rapid transit station areas. Frequent transit corridors, where
anticipated densities can be achieved in wood frame construction, enable lower cost affordable housing to
be built.
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Part 6: Conclusions and Recommendations
1. While efforts to maintain or replace existing affordable rental housing stock are an important element of
a comprehensive regional affordable rental housing strategy, it is also essential to increase the total
supply of rental units to meet future needs for rental accommodation targeted across the entire spectrum
of very low, low, and moderate income households. Without increased supply, there will not be enough
rental housing to meet projected household growth, there will continue to be very low vacancy, and there
will continue to be upward pressure on rent.
2. For the foreseeable future, non-profit organizations and private developers will continue to provide a large
share of total new rental housing construction in Metro Vancouver. There is not enough government
funding being put into rental construction to meet the entire need for new market and affordable rental
units. For private and non-profits to be able to add new rental supply, they must have access to
development lands (or density) available at financially viable (i.e. low or no) cost.
3. Because of the high cost of land in this region, creative approaches are needed to make better use of
existing lands that are controlled by the public or non-profit sectors. Possible approaches include:
a. Tap lands that are controlled by non-profit entities not traditionally involved in housing, such as
service clubs and religious organizations. These entities may have to consider multiple objectives
for their lands (i.e. their core mandate plus housing) and in many cases they will need financial and
technical assistance to take this step. There is great value in providing a one-stop source of
assistance such as the Housing Hub operated by BC Housing, but for this resource to bring new
lands into the housing market it will be necessary to reach out aggressively to land-owning entities
(rather than wait for them to seek help), to provide technical assistance, and to provide funding in the
early idea stage of possible projects.
b. Use locally-owned public sector lands for multiple objectives, when housing is compatible. Schools
with surplus land area, libraries, community centres, and recreation centres are examples in which
an affordable housing component can complement the primary use.
c. Find development opportunities on surplus lands associated with existing transit infrastructure. There
are locations at transit stations and along transit guideways that have the physical capacity to
accommodate development, although these will mostly require cooperation between several parties
(TransLink, local government, the Province, and other owners such as BC Hydro in the case of the
Expo Line as it owns much of the right of way).
These approaches mean that the land owners must be willing to accept low or long term return on their
land or to obtain less value than they would if these lands were made available for strata residential
(where this would have been an option).
4. In the absence of a major increase in funding for public sector land acquisition, there is a need to explore
creative ways to acquire more land (or capacity) for affordable housing. Opportunities include:
a. Strategic land acquisition by local governments and by TransLink when land is being acquired for
transit infrastructure. There will be opportunities to buy more than the minimum land required and
then take advantage of land value gains to both generate revenue and make land available for
affordable housing. This approach does not work if there is no lift in the value of land acquired for
transit, but it the land is acquired early and if TransLink and/or local government benefit from the land
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lift resulting from increased access and additional density, then there is potential to increase the total
stock of housing, increase the stock of affordable housing, and generate revenue for transit
infrastructure. This approach requires that capital funding be available for land acquisition and that
the construction of transit infrastructure is integrated with urban development.
b. Strategic land acquisition by local government in areas that will undergo planning and redevelopment
for increased density, whether or not new transit infrastructure is being constructed. This requires a
mandate and budget for land acquisition and a mandate to include affordable housing in the
redevelopment of such lands. This kind of strategic acquisition could include (for example) assembly
of parcels adjacent to existing civic uses that will be redeveloped and expanded to meet community
needs.
These strategies require land acquisition in the early stages of project design or neighbourhood planning.
When plans are announced long before implementation, the private sector tends to acquire lands more
aggressively than the public sector.
5. Making land (or more often density) available at no cost is a crucial element in achieving more rental
housing, especially affordable rental. This means increasing allowable densities and, when the density
is used for rental, not requiring CACs in most cases. Extra density for rental developments, for private
or non-profit developers, provides the capacity for rental housing and it provides greater potential to
combine a mix of market and affordable rentals, which is one way to make affordable rental units
financially viable.
In addition, because affordable rental is not financially viable on its own in most cases, there is a need
for incentives. One of the best available incentives in this region is to make new residential strata density
(and in some areas market rental density) available in exchange for affordable rental housing. This
approach is already used extensively in Metro Vancouver; it is successful because it captures the land
value of new strata density while creating the physical capacity to accommodate new rental construction.
This use of density bonusing and rezonings to achieve affordable housing via increased density can be
expanded if local governments adopt area plans to designate lands for redevelopment, reduce
uncertainty, and accelerate approvals to reduce cost. The approvals tap must be opened much wider
than it currently is in most communities in Metro Vancouver in order for new rental unit construction to
keep pace with projected requirements based on growth in the number of households.
6. Residential rental tenure zoning on its own will not result in a significant amount of new rental housing
construction, unless combined with sufficient increases in density to enable rental projects to outcompete
existing uses for sites. However, there will be many cases where even large increases in density will not
make rental only projects financially viable, either because the necessary density can only be achieved
in concrete (which is too expensive) or because the necessary density is too high be to acceptable.
Rental only zoning without incentives risks shifting sites from redevelopment candidates to holding
property in current uses such as single detached homes or older low density commercial use.
Residential rental tenure zoning can prevent or postpone the demolition of older rental stock, by
eliminating strata development as a potential use, but this does not contribute to increased rental supply.
Applying residential tenure zoning to private sites, without extra density or incentives, also creates market
uncertainty, can reduce market interest in new rental construction, and can reduce investor interest in
owning rental property. There may be limited instances in which rental only zoning can be effective when
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applied to vacant land, to sites being transitioned from institutional use, or to sites with very low value in
existing use, in order to prevent such sites from being developed as strata.
7. Because residential rental tenure zoning cannot dictate rent levels, any private sector rental built under
rental tenure zoning is likely to be market rental in the absence of other controls. Under current legislation,
the available mechanism to control the rents in private sector projects is the use of housing agreements
under Section 483 of the Local Government Act. Such agreements can control rent and can define target
markets (e.g. households in specific income groups) so these are more effective at ensuring affordable
rental than rental zoning on its own. Housing agreements must be mutually acceptable to developers and
local governments, so they are usually associated with incentives in the form of extra density.
8. Inclusionary housing requirements that specify rents or household income limits cannot currently be
implemented by zoning alone in BC. Imposing such requirements, in the absence of incentives including
additional density, would not help create new rental supply because the reduced net operating income
from lower rents will create an even greater financial challenge for the construction of new rental projects.
This is why many jurisdictions that have adopted inclusionary zoning have included concurrent increases
in density to make development financially viable. In BC, the objective of including affordable housing
can be more effectively achieved through the combination of density increases and the use of housing
agreements, as these can require rental tenure, set rents, and define target rent groups.
9. The best available zoning approach for local governments in Metro Vancouver to facilitate an increase in
the supply of rental housing has three integrated components: (a) create new density to accommodate
affordable rental housing plus new density for strata (or in some cases market rental), (b) convert the
value of the extra market density into affordable housing benefits (either affordable units or cash-in-lieu),
and (c) use housing agreements to control rental tenure and rent rates. This approach cannot take the
place of public sector subsidy for projects aimed entirely at low and very low income households, but it
can allow private sector and non-profit developers to include some affordable rental housing in new
developments.
10. Local governments can help increase the supply of rental housing by reducing approvals risk and
reducing approvals times. One way to reduce approvals risk and timing is to rezone land in advance,
when a comprehensive planning process has identified appropriate locations for higher density, rather
than requiring that rezoning proceed site by site. This is how Seattle is implementing its combination of
higher density and mandatory affordable housing requirements. There is a trade-off, though. Area-wide
“prezoning” requires that the available extra density and the required public benefits (including affordable
housing) be determined in advance for affected sites. This reduces risk and speeds up approvals, but it
means that the total public benefits achieved will likely be less than if the benefits were negotiated site
by site. So, another way to reduce risk and timing is to set clear policy (for density, public benefits,
affordable housing), make it highly likely that rezoning applications consistent with policy will be approved,
and accelerate the process.
11. While addressing the land availability challenge is crucial, government agencies should not ignore the
importance of other ways to address the financial difficulty of providing new rental housing. Steps such
as reducing construction cost (e.g. reduced DCCs, reduced parking), continuing to provide financing at
below market rates, and providing technical assistance to non-profits are important.
12. Local governments can also help increase the supply of new rental housing by taking care in setting
design and construction requirements for affordable housing, with an eye to the cost implications of these
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requirements. Reduced construction cost reduces the breakeven rent that must be achieved in affordable
rental projects.
13. Local governments should be willing to experiment and be flexible regarding how affordable units are
delivered by the private sector. Providing affordable units on a development site is the typical approach
now, but this works best when the site is large enough to accommodate the affordable units in a stand-
alone building. Where the affordable housing obligation for a project is relatively small, local governments
should consider the option of having the units provided off site or in the form of cash-in-lieu funds pooled
to create public sector or non-profit projects. If the question is framed as “what delivers the most units”
rather than starting with an assumption about ownership and location, new creative solutions can emerge.
14. There is broad consensus among private and non-profit housing developers that stand-alone, self-
contained rental buildings (with all affordable rental or a mix of market and affordable rental under single
ownership) work better than buildings that have mixed tenure (strata and rental) or mixed ownership (via
air parcels). Where possible, local governments should look for ways that affordable housing
requirements can be satisfied in single ownership rental buildings. This makes it easier and more efficient
for property management, capital repairs, financing, and very long term decisions about redevelopment.
15. Goals for transit-oriented affordable rental should not focus only on rapid transit stations. These areas
are generally planned for densities that require concrete construction, which is expensive. Frequent
transit corridors, with good bus service and where the appropriate density can be achieved in wood frame
construction, or the shoulder areas around rapid transit nodes can deliver more units for a given
investment. Integrated planning for transit and affordable housing should include all transit-oriented
nodes and corridors.
16. Integrated planning for transit and land use in transit-oriented areas should plan for affordable housing
from the beginning. Because affordable rental housing cannot support land value, it is essential that plans
for residential densification define early goals for the mix of market and affordable housing and early
strategies for how affordable housing can be achieved. This requires signals not just about how much
density is planned, but also the conditions under which additional density will be available, the anticipated
mix of market rental, affordable rental, and strata housing, and the implementation plan for the affordable
rental component. If these goals are defined early, the land market and the private sector development
industry are more able to respond appropriately and the capacity for affordable rental housing can be
created. This integrated planning should include early identification of lands owned by the public sector
or by non-profits that could be good sites for additional density for affordable rental housing.
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Appendix 1: Average Apartment Rents in Metro Vancouver,
2018
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Vancouver — Rental Market Statistics Summary by Census SubdivisionOctober 2018 Apartment 1 Bedroom
Vacancy Rate (%)
Average Rent
($) lowest to
highest Median Rent ($) % Change Units
Maple Ridge (CY) 1 a 878 a 874 a 7.7 c 776
Delta (DM) 1.3 a 931 a 918 a 6.3 a 853
Surrey (CY) 0.4 a 978 a 960 a 5.4 c 2,648
Langley (CY) 1.6 a 1,017 a 939 a 9 b 939
White Rock (CY) 0.9 a 1,019 a 960 a ** 939
Port Moody (CY) ** 1,020 a 985 a ++ 140
Coquitlam (CY) 1.2 a 1,096 a 1,075 a 11.1 c 1,815
New Westminster (CY) 1.6 a 1,109 a 1,057 a 8.3 b 5,478
Port Coquitlam (CY) 1 a 1,140 a 1,055 b 5.5 c 323
Burnaby (CY) 2.2 a 1,149 a 1,100 a 5.5 b 7,446
Pitt Meadows (CY) 0.8 a 1,174 a 1,200 a ** 136
Langley (DM) 1.5 a 1,175 a 1,258 b ++ 201
Richmond (CY) 1 a 1,213 a 1,150 a 4.5 a 1,429
Vancouver 1.1 a 1,307 a 1,250 a 6.4 a 67,989
North Vancouver (CY) 1 a 1,333 a 1,298 a 7.3 c 3,660
Vancouver (CY) 0.8 a 1,411 a 1,389 a 6.2 a 38,795
North Vancouver (DM) 0.9 a 1,452 a 1,460 a 6 b 360
West Vancouver (DM) 0.4 a 1,620 a 1,610 a 4.2 c 1,303
Greater Vancouver A (RDA) 0.3 a 1,749 a 1,741 a 4.9 c 748
Notes
The following letter codes are used to indicate the reliability of the estimates: a - Excellent, b- Very good, c - Good, d - Fair (Use with Caution)
** Data suppressed to protect confidentiality or data not statistically reliable
++ Change in rent is not statistically significant. This means that the change in rent is not statistically different than zero (0). (Applies only to % Change of Average Rent Tables).
- No units exist in the universe for this category
n/a: Not applicable
CMA, CA and CSD definitions are based on 2016 Census Geography Definitions
Source CMHC Rental Market Survey
Vancouver — Rental Market Statistics Summary by Census SubdivisionOctober 2018 Apartment 2 Bedroom
Vacancy Rate (%)
Average Rent
($) lowest to
highest Median Rent ($) % Change Units
Maple Ridge (CY) 2.9 a 1,120 a 1,125 a 9.2 c 461
Surrey (CY) 0.5 a 1,151 a 1,090 a 4.2 c 2,485
Delta (DM) 1.4 a 1,185 a 1,210 a 4 b 767
Port Moody (CY) ** 1,266 b 1,304 b ** 95
Pitt Meadows (CY) 0.8 a 1,270 a 1,250 a 3.2 c 134
White Rock (CY) 1.6 c 1,280 a 1,209 a 8.6 c 375
Coquitlam (CY) 0.9 a 1,290 a 1,276 a 7.7 b 1,062
Langley (CY) 1.2 a 1,330 a 1,250 a 9.8 c 1,008
Burnaby (CY) 1.5 a 1,466 a 1,400 a 4.6 b 3,283
Richmond (CY) 0.3 a 1,466 a 1,409 a 8.5 a 1,191
Port Coquitlam (CY) 3.1 c 1,472 b 1,288 c 9.5 c 307
New Westminster (CY) 1.1 a 1,476 a 1,413 a 7.5 b 2,243
North Vancouver (CY) 0.6 a 1,648 a 1,575 a 5.5 d 1,853
Vancouver 0.9 a 1,649 a 1,505 a 5.5 a 26,751
Langley (DM) 2.6 a 1,658 a 1,753 a ** 190
North Vancouver (DM) 3.2 a 1,833 a 1,750 a 6.2 a 391
Vancouver (CY) 0.7 a 1,964 a 1,875 a 5.3 b 9,622
Greater Vancouver A (RDA) 0.2 a 2,259 a 2,350 b 4.7 c 590
West Vancouver (DM) 1.1 a 2,408 a 2,350 a -1.9 c 694
Notes
The following letter codes are used to indicate the reliability of the estimates: a - Excellent, b- Very good, c - Good, d - Fair (Use with Caution)
** Data suppressed to protect confidentiality or data not statistically reliable
++ Change in rent is not statistically significant. This means that the change in rent is not statistically different than zero (0). (Applies only to % Change of Average Rent Tables).
- No units exist in the universe for this category
n/a: Not applicable
CMA, CA and CSD definitions are based on 2016 Census Geography Definitions
Source CMHC Rental Market Survey
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Appendix 2: Calculations of Break Even Rent for New
Apartments Under Different Scenarios for Private Vs Non-
Profit, Financing Structure Type
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Metro Vancouver - Break Even Rent Calculations
Assumptions:
Unit Size:Net-to-
Gross Ratio
SqFt/ 1BR
Unit
SqFt/ 2BR
Unit
Net SqFt per unit 85% 575 750
Gross SqFt per unit 676 882
Capital Cost Components:Construction Cost $/Gross SqFt $/1BR Unit $/2BR Unit
Concrete - all in construction cost 500$ 338,000$ 441,000$
Wood Frame - all in construction cost 420$ 283,920$ 370,440$
Land Cost $/SqFt $/1BR Unit $/2BR Unit
No Land Cost -$ -$ -$
Land - low 50$ 33,800$ 44,100$
Land - Med 125$ 84,500$ 110,250$
Land - High 200$ 135,200$ 176,400$
PRIVATE Developer's Profit
% of Const
Cost + Land $/1Br Unit $/2Br Unit
Concrete - No Land Cost 15% 50,700$ 66,150$
Concrete - Low Land 15% 55,770$ 72,765$
Concrete - Med Land 15% 63,375$ 82,688$
Concrete - High Land 15% 70,980$ 92,610$
Wood Frame - No Land Cost 15% 42,588$ 55,566$
Wood Frame - Low Land 15% 47,658$ 62,181$
Wood Frame - Med Land 15% 55,263$ 72,104$
Wood Frame - High Land 15% 62,868$ 82,026$
NON-PROFIT Developer's Fee
% of Const
Cost + Land $/1Br Unit $/2Br Unit
Concrete - No Land Cost 5% 16,900$ 22,050$
Concrete - Low Land 5% 18,590$ 24,255$
Concrete - Med Land 5% 21,125$ 27,563$
Concrete - High Land 5% 23,660$ 30,870$
Wood Frame - No Land Cost 5% 14,196$ 18,522$
Wood Frame - Low Land 5% 15,886$ 20,727$
Wood Frame - Med Land 5% 18,421$ 24,035$
Wood Frame - High Land 5% 20,956$ 27,342$
Total Capital Cost Scenarios:
A. PRIVATE DeveloperCost = Construction + Land + Dev Profit $/1Br Unit $/2Br Unit
Concrete - No Land Cost 388,700$ 507,150$
Concrete - Low 427,570$ 557,865$
Concrete - Med 485,875$ 633,938$
Concrete - High 544,180$ 710,010$
Wood Frame - No Land Cost 326,508$ 426,006$
Wood Frame - Low 365,378$ 476,721$
Wood Frame - Med 423,683$ 552,794$
Wood Frame - High 481,988$ 628,866$
B. NON-PROFIT Developer
Cost = Construction + Land + Dev Fee $/1Br Unit $/2Br Unit
Concrete - No Land Cost 354,900$ 463,050$
Concrete - Low 390,390$ 509,355$
Concrete - Med 443,625$ 578,813$
Concrete - High 496,860$ 648,270$
Wood Frame - No Land Cost 298,116$ 388,962$
Wood Frame - Low 333,606$ 435,267$
Wood Frame - Med 386,841$ 504,725$
Wood Frame - High 440,076$ 574,182$
Annual Operating Cost: $/1Br Unit $/2Br Unit
Cost/year/unit 4,800$ 6,200$
Cost/month/unit 400.00-$ 516.67-$
Financing Terms:
PRIVATE
Developer'
s Financing
NON-
PROFIT
Developer'
s Financing
Interest Rate
Nominal rate (%/year semi annual compounding) 4.0% 3.0%
Effective rate per compounding period 2.0% 1.5%
Equivalent Monthly rate 0.3305890% 0.2484517%
Amortization Period
# Years 35 50
# Months 420 600
Principal (as % of Cost) 75% 100%
Monthly Payment Factor (for Principal = $1) -$0.0044080 -$0.0032084
Equity (as % of Cost) 25% 0%
Required Return on Equity
% Return per year, annual compounding 7.0% 0.0%
% Return per month (equivalent to annual rate) 0.5654145% 0.0000000%
Monthly Financing Costs:
Mortgage Payment
Principal = % X (Const Cost+Land+Dev Profit or Fee) $/1Br Unit $/2Br Unit $/1Br Unit $/2Br Unit
Concrete - No Land Cost 1,285-$ 1,677-$ 1,139-$ 1,486-$
Concrete - Low Land 1,414-$ 1,844-$ 1,253-$ 1,634-$
Concrete - Med Land 1,606-$ 2,096-$ 1,423-$ 1,857-$
Concrete - High Land 1,799-$ 2,347-$ 1,594-$ 2,080-$
Wood Frame - No Land Cost 1,079-$ 1,408-$ 956-$ 1,248-$
Wood Frame - Low Land 1,208-$ 1,576-$ 1,070-$ 1,397-$
Wood Frame - Med Land 1,401-$ 1,828-$ 1,241-$ 1,619-$
Wood Frame - High Land 1,593-$ 2,079-$ 1,412-$ 1,842-$
Return On Equity
Cost = % Required Return X Equity $/1Br Unit $/2Br Unit $/1Br Unit $/2Br Unit
Concrete - No Land Cost 549-$ 717-$ -$ -$
Concrete - Low Land 604-$ 789-$ -$ -$
Concrete - Med Land 687-$ 896-$ -$ -$
Concrete - High Land 769-$ 1,004-$ -$ -$
Wood Frame - No Land Cost 462-$ 602-$ -$ -$
Wood Frame - Low Land 516-$ 674-$ -$ -$
Wood Frame - Med Land 599-$ 781-$ -$ -$
Wood Frame - High Land 681-$ 889-$ -$ -$
Break Even Rents* *Break Even is defined as Rent needed to cover Operating Costs, and Mortgage payment (P+I) and
Return on Equity (interest only) required to finance Capital Costs**
**Capital Costs = Construction Cost + Land + Developer's Profit or Fee. Land Cost is sometimes set to zero.
Capital Cost Scenario: Private 1BR Private 2BR
Non-Profit
1BR
Non-
Profit 2Br
Concrete - No Land 2,234$ 2,910$ 1,539$ 2,002$
Concrete - Low Land 2,418$ 3,150$ 1,653$ 2,151$
Concrete - Med Land 2,693$ 3,509$ 1,823$ 2,374$
Concrete - High Land 2,968$ 3,868$ 1,994$ 2,597$
Frame - No Land 1,941$ 2,527$ 1,356$ 1,765$
Frame - Low Land 2,124$ 2,767$ 1,470$ 1,913$
Frame - Med Land 2,400$ 3,126$ 1,641$ 2,136$
Frame - High Land 2,675$ 3,485$ 1,812$ 2,359$
Required Monthly ROE,
PRIVATE Developer
Required Monthly
ROE, NON-PROFIT
Developer
Monthly Pmt PRIVATE
Developer
Monthly Pmt NON-
PROFIT Developer
Break Even Rent with
PRIVATE Developer
Break Even Rent with
NON-PROFIT
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Metro Vancouver - Break Even Rent Calculations
Assumptions:
Unit Size:Net-to-
Gross Ratio
SqFt/ 1BR
Unit
SqFt/ 2BR
Unit
Net SqFt per unit 85% 575 750
Gross SqFt per unit 676 882
Capital Cost Components:Construction Cost $/Gross SqFt $/1BR Unit $/2BR Unit
Concrete - all in construction cost 500$ 338,000$ 441,000$
Wood Frame - all in construction cost 420$ 283,920$ 370,440$
Land Cost $/SqFt $/1BR Unit $/2BR Unit
No Land Cost -$ -$ -$
Land - low 50$ 33,800$ 44,100$
Land - Med 125$ 84,500$ 110,250$
Land - High 200$ 135,200$ 176,400$
PRIVATE Developer's Profit
% of Const
Cost + Land $/1Br Unit $/2Br Unit
Concrete - No Land Cost 15% 50,700$ 66,150$
Concrete - Low Land 15% 55,770$ 72,765$
Concrete - Med Land 15% 63,375$ 82,688$
Concrete - High Land 15% 70,980$ 92,610$
Wood Frame - No Land Cost 15% 42,588$ 55,566$
Wood Frame - Low Land 15% 47,658$ 62,181$
Wood Frame - Med Land 15% 55,263$ 72,104$
Wood Frame - High Land 15% 62,868$ 82,026$
NON-PROFIT Developer's Fee
% of Const
Cost + Land $/1Br Unit $/2Br Unit
Concrete - No Land Cost 5% 16,900$ 22,050$
Concrete - Low Land 5% 18,590$ 24,255$
Concrete - Med Land 5% 21,125$ 27,563$
Concrete - High Land 5% 23,660$ 30,870$
Wood Frame - No Land Cost 5% 14,196$ 18,522$
Wood Frame - Low Land 5% 15,886$ 20,727$
Wood Frame - Med Land 5% 18,421$ 24,035$
Wood Frame - High Land 5% 20,956$ 27,342$
Total Capital Cost Scenarios:
A. PRIVATE DeveloperCost = Construction + Land + Dev Profit $/1Br Unit $/2Br Unit
Concrete - No Land Cost 388,700$ 507,150$
Concrete - Low 427,570$ 557,865$
Concrete - Med 485,875$ 633,938$
Concrete - High 544,180$ 710,010$
Wood Frame - No Land Cost 326,508$ 426,006$
Wood Frame - Low 365,378$ 476,721$
Wood Frame - Med 423,683$ 552,794$
Wood Frame - High 481,988$ 628,866$
B. NON-PROFIT Developer
Cost = Construction + Land + Dev Fee $/1Br Unit $/2Br Unit
Concrete - No Land Cost 354,900$ 463,050$
Concrete - Low 390,390$ 509,355$
Concrete - Med 443,625$ 578,813$
Concrete - High 496,860$ 648,270$
Wood Frame - No Land Cost 298,116$ 388,962$
Wood Frame - Low 333,606$ 435,267$
Wood Frame - Med 386,841$ 504,725$
Wood Frame - High 440,076$ 574,182$
Annual Operating Cost: $/1Br Unit $/2Br Unit
Cost/year/unit 4,800$ 6,200$
Cost/month/unit 400.00-$ 516.67-$
Financing Terms:
PRIVATE
Developer'
s Financing
NON-
PROFIT
Developer'
s Financing
Interest Rate
Nominal rate (%/year semi annual compounding) 4.0% 3.0%
Effective rate per compounding period 2.0% 1.5%
Equivalent Monthly rate 0.3305890% 0.2484517%
Amortization Period
# Years 35 50
# Months 420 600
Principal (as % of Cost) 75% 100%
Monthly Payment Factor (for Principal = $1) -$0.0044080 -$0.0032084
Equity (as % of Cost) 25% 0%
Required Return on Equity
% Return per year, annual compounding 7.0% 0.0%
% Return per month (equivalent to annual rate) 0.5654145% 0.0000000%
Monthly Financing Costs:
Mortgage Payment
Principal = % X (Const Cost+Land+Dev Profit or Fee) $/1Br Unit $/2Br Unit $/1Br Unit $/2Br Unit
Concrete - No Land Cost 1,285-$ 1,677-$ 1,139-$ 1,486-$
Concrete - Low Land 1,414-$ 1,844-$ 1,253-$ 1,634-$
Concrete - Med Land 1,606-$ 2,096-$ 1,423-$ 1,857-$
Concrete - High Land 1,799-$ 2,347-$ 1,594-$ 2,080-$
Wood Frame - No Land Cost 1,079-$ 1,408-$ 956-$ 1,248-$
Wood Frame - Low Land 1,208-$ 1,576-$ 1,070-$ 1,397-$
Wood Frame - Med Land 1,401-$ 1,828-$ 1,241-$ 1,619-$
Wood Frame - High Land 1,593-$ 2,079-$ 1,412-$ 1,842-$
Return On Equity
Cost = % Required Return X Equity $/1Br Unit $/2Br Unit $/1Br Unit $/2Br Unit
Concrete - No Land Cost 549-$ 717-$ -$ -$
Concrete - Low Land 604-$ 789-$ -$ -$
Concrete - Med Land 687-$ 896-$ -$ -$
Concrete - High Land 769-$ 1,004-$ -$ -$
Wood Frame - No Land Cost 462-$ 602-$ -$ -$
Wood Frame - Low Land 516-$ 674-$ -$ -$
Wood Frame - Med Land 599-$ 781-$ -$ -$
Wood Frame - High Land 681-$ 889-$ -$ -$
Break Even Rents* *Break Even is defined as Rent needed to cover Operating Costs, and Mortgage payment (P+I) and
Return on Equity (interest only) required to finance Capital Costs**
**Capital Costs = Construction Cost + Land + Developer's Profit or Fee. Land Cost is sometimes set to zero.
Capital Cost Scenario: Private 1BR Private 2BR
Non-Profit
1BR
Non-
Profit 2Br
Concrete - No Land 2,234$ 2,910$ 1,539$ 2,002$
Concrete - Low Land 2,418$ 3,150$ 1,653$ 2,151$
Concrete - Med Land 2,693$ 3,509$ 1,823$ 2,374$
Concrete - High Land 2,968$ 3,868$ 1,994$ 2,597$
Frame - No Land 1,941$ 2,527$ 1,356$ 1,765$
Frame - Low Land 2,124$ 2,767$ 1,470$ 1,913$
Frame - Med Land 2,400$ 3,126$ 1,641$ 2,136$
Frame - High Land 2,675$ 3,485$ 1,812$ 2,359$
Required Monthly ROE,
PRIVATE Developer
Required Monthly
ROE, NON-PROFIT
Developer
Monthly Pmt PRIVATE
Developer
Monthly Pmt NON-
PROFIT Developer
Break Even Rent with
PRIVATE Developer
Break Even Rent with
NON-PROFIT
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PAGE 73
Appendix 3: Explanation of Cap Rates and Implications for
New Private Sector Rental Construction
A Cap rate is a simple but common measure used to relate the annual income from a property to the value
an investor would be willing to pay for the property, using the formula Cap Rate = Net Operating Income/
Value. This can be algebraically revised to the form Value = Net Operating Income/Rate, so that if one knows
the net operating income from an asset and applies a target cap rate, one can estimate the value of the asset.
If a rental apartment building generates annual net operating income of $1,000,000 and the investor applies
a cap rate of say 3.75%, the value of the asset would be about $26.7 million. However, if the investor applies
a cap rate of 4%, the most the investor would pay for this asset is $25.0 million. This is crucial to the viability
of new projects because the all-in cost (land, construction cost, profit) must be equal to or less than this value
for the project to proceed. If the creation cost of a possible new apartment building will be $30 million, but
the rental income only supports a value to an investor of $28 million, this project is not viable.
It is important to understand that the cap rate is a simple indicator that is not usually equal to the true rate of
return that an investor expects to earn over the life of an investment. Return on an income-producing property
usually has three components: the return derived from the continuation of current income, the return derived
from growth in income (on the basis that rents will rise faster than operating costs), and the return derived
from selling the asset for more than the original purchase price (which happens if the income goes up). The
combined total return on investment (using IRR, or Internal Rate of Return) is usually about 2% to 3% higher
than the cap rate. So, if prevailing cap rates are 4%, then it is likely that investors are expecting the project
to yield 6% to 7% IRR. The cap rate only reflects the part of the return that comes from continuation of current
income. If the potential for future income growth becomes lower for any reason, then the portion of total
return that comes from current income must increase (i.e. cap rates go up). So, why would cap rates increase
for rental apartment buildings? There are several possible reasons. One possibility is rising interest rates. If
mortgage rates increase, then a given net operating income supports less borrowing which tends to put
downward pressure on the amount investors are willing to pay for an asset. Also, rising interest rates can
mean investors can earn a greater return on investments with less risk than real estate, so real estate prices
must fall to match the performance. Another possibility, and it should be a crucial consideration in government
regulation of rental housing, is that investors see a risk of reduced future income due to rent control. If growth
in rents is constrained, then a higher proportion of total return must come from continuation of current income,
so cap rates rise. If cap rates rise, then the value of assets falls, so it becomes harder to deliver a new project
within this lower ceiling on total creation cost.
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 74
Appendix 4: Metro Vancouver Local Government Measures
to Encourage or Facilitate Rental Housing
The table on the following page summarizes local government measures in Metro Vancouver to encourage
and support purpose-built rental housing. A check mark indicates that the local government currently has
zoning or policy documents in place (or draft bylaws) to implement the indicated measure for market rental
housing, below-market rental housing, and/or non-market rental housing. If a municipality’s OCP, housing
strategy, or housing action plan calls for exploring the potential to implement one of the tools, but detailed
policy or bylaw amendments have not yet been drafted or adopted, we have left the cell blank.
This table was compiled using information from Metro Vancouver’s “2018 Municipal Measures for Housing
Affordability and Diversity” table supplemented with internet research, anecdotal observations as of mid-
January 2019, and discussions with staff at some municipalities. Direct contact with each municipality was
not within the scope of our work.
Readers interested in understanding a given municipality’s specific measures to encourage and support
rental housing should contact municipal staff directly. Municipal policies and regulations to support rental
housing in the region are changing quickly, so the measures being used by individual municipalities are fluid
and subject to change.
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 75
Not
es:
a. R
enta
l uni
t ret
entio
n/re
plac
emen
t pol
icie
s va
ry th
roug
hout
the
regi
on a
nd in
clud
e re
stric
tions
on
stra
tifyi
ng e
xist
ing
rent
al p
roje
cts,
dem
oliti
on p
olic
ies
to r
estr
ict t
he lo
ss o
f
exis
ting
rent
al u
nits
, and
/or
requ
irin
g on
e-fo
r-on
e re
plac
emen
t of d
emol
ishe
d re
ntal
uni
ts (
in s
ome
case
s w
ith r
equ
irem
ents
to p
rovi
de th
e sa
me
num
ber
of u
nits
by
type
or
by
size
and
with
ren
t lim
itatio
ns).
b. S
ome
mun
icip
aliti
es o
ffer
addi
tion
al d
ensi
ty th
at is
link
ed to
pro
vidi
ng b
elow
-mar
ket r
enta
l uni
ts in
mar
ket r
enta
l hou
sing
pro
ject
s (e
.g. N
orth
Van
couv
er C
ity),
req
uirin
g m
arke
t
or b
elow
-mar
ket r
enta
l hou
sing
in s
trat
a re
side
ntia
l pro
ject
s (e
.g. d
raft
polic
y in
Ne
w W
estm
inst
er, e
xist
ing
polic
y in
Ric
hmon
d, c
ase
-by-
case
rez
onin
gs in
the
Dis
tric
t of N
orth
Van
couv
er a
nd in
Wes
t Van
cou
ver)
, and
req
uirin
g no
n-m
arke
t hou
sing
in s
trat
a re
side
ntia
l pro
ject
s as
par
t of r
ezon
ing
appr
oval
s (e
.g. V
anco
uver
).
c. T
his
incl
udes
par
king
red
uctio
ns a
vaila
ble
to p
roje
cts
(ren
tal a
nd s
trat
a) n
ear
tran
sit,
park
ing
redu
ctio
ns s
et o
ut in
pol
icie
s sp
ecifi
cally
to s
uppo
rt r
enta
l hou
sing
pro
ject
s, a
nd
case
-by-
case
red
uctio
ns o
f par
king
req
uire
men
t red
uctio
ns fo
r re
ntal
hou
sin
g pr
ojec
ts.
d. T
his
incl
udes
dire
ct w
aive
rs o
r re
duct
ions
of D
CC
s (o
r D
CLs
in V
anco
uver
) as
wel
l as
indi
rect
mea
sure
s su
ch a
s pr
ovid
ing
gran
ts th
at c
an b
e us
ed to
off
-set
mun
icip
al D
CC
s
and/
or p
erm
it fe
es.
e. r
enta
l zon
ing
is a
rel
ativ
ely
new
tool
. Bur
naby
ado
pted
zon
ing
byla
w a
men
dmen
ts in
fall
2018
to a
llow
ren
tal '
r' su
b-d
istr
icts
to b
e ap
plie
d to
exi
stin
g di
stric
ts th
at p
erm
it tw
o or
mor
e dw
ellin
g un
its. B
urna
by is
cur
rent
ly d
evel
opin
g an
impl
emen
tatio
n st
rate
gy fo
r th
e re
ntal
zon
ing
and
antic
ipat
es a
pply
ing
the
ren
tal z
onin
g in
pilo
t pro
ject
s in
the
nea
r
futu
re. N
ew W
estm
inst
er a
dopt
ed a
byl
aw in
late
Jan
uary
201
9 th
at w
ill a
pply
a n
ew r
enta
l res
iden
tial t
enur
e zo
ning
aut
horit
y to
exi
stin
g re
ntal
hou
sing
sto
ck in
clud
ing
6
stra
tifie
d re
ntal
bui
ldin
gs a
nd 1
2 C
ity-o
wne
d pr
oper
ties.
Por
t Moo
dy w
as c
onsi
derin
g ap
plyi
ng r
enta
l zon
ing
to 4
exi
stin
g re
ntal
pro
ject
s, b
ut w
e un
ders
tand
this
is c
urre
ntly
bein
g re
-con
side
red
so w
e ha
ve n
ot in
clud
ed it
.
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 76
Appendix 5, 6, and 7: Financial Analysis for Case Study
Sites
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 77
Appendix 5 – Burnaby Exhibit 1:
Estimated Income Value Assuming Property is Improved with Old Low Density Commercial Buildings
Assume C-3 site located along Kingsway
Major Assumptions Site and Building Size Existing Zoning C-3
Site Size 55,000 sq.ft. or 215 by
256
Assumed Density 0.40 FSR
Retail 22,000 sq.ft. 100
% rentable
Revenue and Value
Average Lease Rate for Retail Space $25.00 per sq.ft. net, base building
Capitalization Rate 4.75% Value of Retail and Service Space Upon Lease-up $526 per sq.ft. of leasable area Vacancy and non recoverables 0%
Estimated Overall Value
Capitalized Value of Retail/Service Space $11,578,94
7
Total Value of Commercial $11,578,94
7
Appendix 5 – Burnaby Exhibit 2:
Estimated Income Value of Property if Improved with an Older Low Density Rental Building
Rental Apartment Value
Site Size (SF) 55,000
Assumed FSR 0.9
Total Floor Area (SF) 49,500
Average Gross Unit Size (SF) 800
Number of Units 62
Market Value Per Unit1 $275,000
Value of Rental $17,050,000
1Based on recent market transactions.
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 78
Appendix 5 – Burnaby Exhibit 3:
Land Residual Estimate for Wood Frame Strata Development
Assume 1.5 FSR achieved under RM3s
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 55,000 sq.ft. 1.26 acre
Dedications 0 sq.ft.
Site Size 55,000 sq.ft. or
Site Frontage 620 ft
Base Density 1.1 FSR
Bonus Density 0.4 FSR
Total Density 1.5 FSR
Total Gross floorspace 82,500 sq.ft.
Gross residential floorspace 82,500 sq.ft.
Gross commercial floorspace 0 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1000
sf
Parking
Stalls Share of Units
Strata Residential 82,500 85% 70,125 725 97 1.1 107 100%
Rental 1 0 85% 0 573 0 1.1 0 0%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 2.0 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 82,500 70,125 97 107 100%
Revenue/Value
Strata Residential $850 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122 $5,000 per lineal metre of frontage
Density Bonus Contribution $176 psf of bonus density
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 79
Appendix 5 – Burnaby Exhibit 3 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $205 per gross sq.ft. of residential area
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $0 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $50,000 per underground/structured parking stall
Overall Costs Per Square Foot $270 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $270
Hard Cost Used in Analysis $270
Site Landscaping $550,000 or $20 psf of site area on 50% of site
Electrical Charging Station $97,000 97 stations $1,000 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $1,072 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $1,072 per unit
GVS & DD Sewer Levy - Commercial $0.93 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $0.00 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $0.306 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $3,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.284% of assessed value
Assumed current assessment (Year 1 of analysis) $10,500,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $29,803,125 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $10,500,000
Assumed residential portion of assessment after 1 year of construction $29,803,125 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 80
Appendix 5 – Burnaby Exhibit 3 Continued:
Analysis
Revenue
Strata Sales Revenue $59,606,250
Rental 1 Value $0
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $59,606,250
Less Commissions on Strata $1,788,188
Less Commissions on Rental $0
Less Commissions on Commercial $0
Net Sales Revenue/Value $57,818,063
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122
Electrical Charging Station $97,000
Density Bonus Contribution $3,875,728
Rezoning Costs $500,000
Hard Construction Costs $22,262,500
Site Landscaping $550,000
Electrical Charging Station $97,000
Other $0
Soft costs and Professional Fees $2,407,825
Development management $922,055
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $1,607,862
Car Share $0
Marketing on Strata Units $1,788,188
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $103,984
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $0
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $116,400
TransLink - Townhouse $0
TransLink - Rental Residential $0
TransLink - Commercial $0
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $58,200
Less property tax allowance during approvals/development $108,192
Less School Tax Surcharge During Development $120,909
Interim financing on construction costs $1,179,283
Financing fees/costs $418,953
Less Net GST (assuming builder holds units) $0
Total Project Costs Before Land $37,659,200
Developer's Profit $7,772,655
Residual to Land and Land Carry $12,386,207
Less financing on land during construction and approvals $620,085
Less financing fee on land loan $79,421
Less property closing costs $480,618
Residual Land Value $11,206,083
Residual Value per sq.ft. of site $204
Residual Value per sq.ft. of FSR $136
Residual Value per sq.ft. of gross buildable floorspace $136
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 81
Appendix 5 – Burnaby Exhibit 4:
Land Residual Estimate for Wood Frame Rental Development
Assume 1.5 FSR achieved under RM3s
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 55,000 sq.ft. 1.26 acre
Dedications 0 sq.ft.
Site Size 55,000 sq.ft. or
Site Frontage 620 ft
Base Density 1.1 FSR
Bonus Density 0.4 FSR
Total Density 1.5 FSR
Total Gross floorspace 82,500 sq.ft.
Gross residential floorspace 82,500 sq.ft.
Gross commercial floorspace 0 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1000
sf
Parking
Stalls Share of Units
Strata Residential 0 85% 0 650 0 1.1 0 0%
Rental 1 82,500 85% 70,125 589 119 1.1 131 100%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 2.0 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 82,500 70,125 119 131 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $763 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122 $5,000 per lineal metre of frontage
Density Bonus Contribution $0 psf of bonus density
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 82
Appendix 5 – Burnaby Exhibit 4 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0 per gross sq.ft. of residential area
Rental 1 Residential Area $195 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $0 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $50,000 per underground/structured parking stall
Overall Costs Per Square Foot $274 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $274
Hard Cost Used in Analysis $274
Site Landscaping $550,000 or $20 psf of site area on 50% of site
Electrical Charging Station $119,000 119 stations $1,000 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $1,072 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $1,072 per unit
GVS & DD Sewer Levy - Commercial $0.93 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $0.00 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $0.306 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $3,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.284% of assessed value
Assumed current assessment (Year 1 of analysis) $10,500,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $26,737,091 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $10,500,000
Assumed residential portion of assessment after 1 year of construction $26,737,091 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 83
Appendix 5 – Burnaby Exhibit 4 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $53,474,181
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $53,474,181
Less Commissions on Strata $0
Less Commissions on Rental $1,069,484
Less Commissions on Commercial $0
Net Sales Revenue/Value $52,404,698
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122
Electrical Charging Station $119,000
Density Bonus Contribution $0
Rezoning Costs $500,000
Hard Construction Costs $22,637,500
Site Landscaping $550,000
Electrical Charging Station $119,000
Other $0
Soft costs and Professional Fees $2,114,003
Development management $809,539
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $1,414,708
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $357,000
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $127,568
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $142,800
TransLink - Commercial $0
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $71,400
Less property tax allowance during approvals/development $101,662
Less School Tax Surcharge During Development $111,711
Interim financing on construction costs $1,001,086
Financing fees/costs $355,749
Less Net GST (assuming builder holds units) $2,673,709
Total Project Costs Before Land $34,651,557
Developer's Profit $6,973,033
Residual to Land and Land Carry $10,780,107
Less financing on land during construction and approvals $539,679
Less financing fee on land loan $69,123
Less property closing costs $408,637
Residual Land Value $9,762,668
Residual Value per sq.ft. of site $178
Residual Value per sq.ft. of FSR $118
Residual Value per sq.ft. of gross buildable floorspace $118
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 84
Appendix 5 – Burnaby Exhibit 4 Continued:
Rental 1 Value
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 26 22% 450 1,500$
1-Bedroom 57 48% 550 1,700$
2-Bedroom 36 30% 750 2,400$
3-Bedroom 0 0% 0 -$
Total 119 100%
Average 589 1,868$
3.17$
Annual Revenue
Studios 468,000$
1-Bedroom 1,162,800$
2-Bedroom 1,036,800$
3-Bedroom -$
TOTAL 2,667,600$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $3.17 psf per month or
$1,868 per unit per month
Monthly Parking Revenue $100 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,450 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $55,048,125 (see capitalized value below)
Residential Tax Rate 0.284%
Residential Property Taxes $156,309
Capitalization Rate for Rental Apartment Space 4.00%
Capitalized Value
Rental Revenue $2,667,600
Storage $28,560
Parking $157,200
Total $2,853,360
Vacancy $28,534
Net $2,824,826
Op Costs $529,550
Taxes $156,309
NOI $2,138,967
Capitalized Value $53,474,181
psf of rentable space $763
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 85
Appendix 5 – Burnaby Exhibit 5:
Land Residual Estimate for Concrete Strata Mixed-Use Development
Assume 5.3 FSR achieved under RM5s (5.0 FSR Residential with 0.3 FSR Commercial)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 55,000 sq.ft. 1.26 acre
Dedications 0 sq.ft.
Site Size 55,000 sq.ft. or
Site Frontage 620 ft
Base Density 3.7 FSR
Bonus Density 1.6 FSR
Total Density 5.3 FSR
Total Gross floorspace 291,500 sq.ft.
Gross residential floorspace 275,000 sq.ft.
Gross commercial floorspace 16,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1000
sf
Parking
Stalls Share of Units
Strata Residential 275,000 85% 233,750 725 322 1.1 354 100%
Rental 1 0 85% 0 573 0 1.1 0 0%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 16,500 100% 16,500 n/a n/a 2.0 33 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 291,500 250,250 322 387 100%
Revenue/Value
Strata Residential $1,150 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $825 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122 $5,000 per lineal metre of frontage
Density Bonus Contribution $253 psf of bonus density
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 86
Appendix 5 – Burnaby Exhibit 5 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $310 per gross sq.ft. of residential area
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $250 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $380 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $380
Hard Cost Used in Analysis $380
Site Landscaping $550,000 or $20 psf of site area on 50% of site
Electrical Charging Station $322,000 322 stations $1,000 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $1,072 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $1,072 per unit
GVS & DD Sewer Levy - Commercial $0.93 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $0.00 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $0.306 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 2.50 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $3,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.284% of assessed value
Assumed current assessment (Year 1 of analysis) $45,000,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $141,214,671 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $45,000,000
Assumed residential portion of assessment after 1 year of construction $134,406,250 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 87
Appendix 5 – Burnaby Exhibit 5 Continued:
Analysis
Revenue
Strata Sales Revenue $268,812,500
Rental 1 Value $0
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $13,616,842
Gross Office Value $0
Total Gross Value $282,429,342
Less Commissions on Strata $8,064,375
Less Commissions on Rental $0
Less Commissions on Commercial $272,337
Net Sales Revenue/Value $274,092,630
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122
Electrical Charging Station $322,000
Density Bonus Contribution $22,281,935
Rezoning Costs $500,000
Hard Construction Costs $110,660,000
Site Landscaping $550,000
Electrical Charging Station $322,000
Other $0
Soft costs and Professional Fees $11,524,390
Development management $4,413,163
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $7,600,930
Car Share $0
Marketing on Strata Units $8,064,375
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $82,500
Tenant Improvement Allowance on Retail Space $412,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $345,184
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $0
GVS & DD Sewer Levy - Commercial $15,345
TransLink - Strata Apartment Residential $386,400
TransLink - Townhouse $0
TransLink - Rental Residential $0
TransLink - Commercial $20,625
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $5,049
Office DCCs $0
School Site Acquisition Charge $193,200
Less property tax allowance during approvals/development $793,135
Less School Tax Surcharge During Development $1,034,438
Interim financing on construction costs $7,965,837
Financing fees/costs $2,013,054
Less Net GST (assuming builder holds units) $0
Total Project Costs Before Land $180,951,181
Developer's Profit $36,828,786
Residual to Land and Land Carry $56,312,663
Less financing on land during construction and approvals $3,758,870
Less financing fee on land loan $354,738
Less property closing costs $2,404,955
Residual Land Value $49,794,099
Residual Value per sq.ft. of site $905
Residual Value per sq.ft. of FSR $171
Residual Value per sq.ft. of gross buildable floorspace $171
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 88
Appendix 5 – Burnaby Exhibit 5 Continued:
Retail Assumptions
Lease Rate NNN $40.00 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $40,000
Parking $0
Total $40,000
Vacancy $800
NOI $39,200
Capitalized Value $825,263
Value psf of net leasable space $825.26 psf
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 89
Appendix 5 – Burnaby Exhibit 6:
Land Residual Estimate for Rental Mixed-Use Development
Assume 5.3 FSR achieved under RM5s (5.0 FSR Residential with 0.3 FSR Commercial)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 55,000 sq.ft. 1.26 acre
Dedications 0 sq.ft.
Site Size 55,000 sq.ft. or
Site Frontage 620 ft
Base Density 3.7 FSR
Bonus Density 1.6 FSR
Total Density 5.3 FSR
Total Gross floorspace 291,500 sq.ft.
Gross residential floorspace 275,000 sq.ft.
Gross commercial floorspace 16,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1000
sf
Parking
Stalls Share of Units
Strata Residential 0 85% 0 725 0 1.1 0 0%
Rental 1 275,000 85% 233,750 590 396 1.1 436 100%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 16,500 100% 16,500 n/a n/a 2.0 33 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 291,500 250,250 396 469 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $788 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $825 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122 $5,000 per lineal metre of frontage
Density Bonus Contribution $0 psf of bonus density
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 90
Appendix 5 – Burnaby Exhibit 6 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0 per gross sq.ft. of residential area
Rental 1 Residential Area $300 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $250 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $386 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $386
Hard Cost Used in Analysis $386
Site Landscaping $550,000 or $20 psf of site area on 50% of site
Electrical Charging Station $396,000 396 stations $1,000 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $1,072 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $1,072 per unit
GVS & DD Sewer Levy - Commercial $0.93 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $0.00 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $0.306 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 2.50 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $3,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.284% of assessed value
Assumed current assessment (Year 1 of analysis) $45,000,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $98,927,260 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $45,000,000
Assumed residential portion of assessment after 1 year of construction $92,118,839 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 91
Appendix 5 – Burnaby Exhibit 6 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $184,237,677
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $13,616,842
Gross Office Value $0
Total Gross Value $197,854,520
Less Commissions on Strata $0
Less Commissions on Rental $3,684,754
Less Commissions on Commercial $272,337
Net Sales Revenue/Value $193,897,429
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $500,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $945,122
Electrical Charging Station $396,000
Density Bonus Contribution $0
Rezoning Costs $500,000
Hard Construction Costs $112,420,000
Site Landscaping $550,000
Electrical Charging Station $396,000
Other $0
Soft costs and Professional Fees $9,792,605
Development management $3,749,992
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $6,462,486
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $1,188,000
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $82,500
Tenant Improvement Allowance on Retail Space $412,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $424,512
GVS & DD Sewer Levy - Commercial $15,345
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $475,200
TransLink - Commercial $20,625
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $5,049
Office DCCs $0
School Site Acquisition Charge $237,600
Less property tax allowance during approvals/development $613,022
Less School Tax Surcharge During Development $780,713
Interim financing on construction costs $6,524,370
Financing fees/costs $1,648,031
Less Net GST (assuming builder holds units) $9,211,884
Total Project Costs Before Land $157,351,556
Developer's Profit $25,800,229
Residual to Land and Land Carry $10,745,644
Less financing on land during construction and approvals $717,272
Less financing fee on land loan $67,692
Less property closing costs $398,632
Residual Land Value $9,562,048
Residual Value per sq.ft. of site $174
Residual Value per sq.ft. of FSR $33
Residual Value per sq.ft. of gross buildable floorspace $33
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 92
Appendix 5 – Burnaby Exhibit 6 Continued:
Retail Assumptions
Lease Rate NNN $40.00 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $40,000
Parking $0
Total $40,000
Vacancy $800
NOI $39,200
Capitalized Value $825,263
Value psf of net leasable space $825.26 psf
Rental 1
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 80 20% 450 1,550$
1-Bedroom 196 49% 550 1,750$
2-Bedroom 120 30% 750 2,450$
3-Bedroom 0 0% 0 -$
Total 396 100%
Average 590 1,922$
3.25$
Annual Revenue
Studios 1,488,000$
1-Bedroom 4,116,000$
2-Bedroom 3,528,000$
3-Bedroom -$
TOTAL 9,132,000$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $3.25 psf per month or
$1,922 per unit per month
Monthly Parking Revenue $100 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,450 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $183,493,750 (see capitalized value below)
Residential Tax Rate 0.284%
Residential Property Taxes $521,031
Capitalization Rate for Rental Apartment Space 4.00%
Capitalized Value
Rental Revnue $9,132,000
Parking $523,200
Storage $95,040
Total $9,750,240
Vacancy $97,502
Net $9,652,738
Op Costs $1,762,200
Taxes $521,031
NOI $7,369,507
Capitalized Value $184,237,677
psf of rentable space $788
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 93
Appendix 6 – Surrey Exhibit 1:
Estimated Income Value Assuming Property is Improved with Old Low Density Commercial Buildings
Major Assumptions
Site and Building Size
Existing Zoning C-8
Site Size 45,000 sq.ft. or 160 by 281
Assumed Density 0.40 FSR
Retail 18,000 sq.ft. 100% rentable
Revenue and Value
Average Lease Rate for Retail Space $22.50 per sq.ft. net, base building
Capitalization Rate 4.75%
Value of Retail and Service Space Upon Lease-up $474 per sq.ft. of leasable area
Vacancy and non recoverables 0%
Estimated Overall Value
Capitalized Value of Retail/Service Space $8,526,316
Total Value of Commercial $8,526,316
Appendix 6 – Surrey Exhibit 2:
Estimated Income Value of Property if Improved with an Older Low Density Rental Building
Rental Apartment Value
Site Size (SF) 45,000
Assumed FSR 0.8
Total Floor Area (SF) 33,750
Average Gross Unit Size (SF) 850
Number of Units 40
Market Value Per Unit1 $200,000
Value of Rental $8,000,000
1Based on recent market transactions.
Appendix 6 – Surrey Exhibit 3:
Estimated Existing Value of Site if Improved with Older Single Family Houses
Single Family Assembly Value
Site Size (SF) 45,000
Value Per SF of Site $110
Total Value $4,950,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 94
Appendix 6 – Surrey Exhibit 4:
Land Residual Estimate for Wood Frame Strata Development - No Rental Replacement
Assume 2.5 FAR (OCP Density)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 2.5 FAR
Bonus Density 0.0 FAR
Total Density 2.5 FAR
Total Gross floorspace 112,500 sq.ft.
Gross residential floorspace 112,500 sq.ft.
Gross commercial floorspace 0 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 112,500 85% 95,625 715 134 1.3 174 100%
Rental 1 0 85% 0 619 0 1.3 0 0%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 3.00 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 112,500 95,625 134 174 100%
Revenue/Value
Strata Residential $630 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.24 psf of gross building
Undergrounding Utilities $1.74 psf of gross building *ask about non residential
Community Amenity Contribution Non-Residential $0.00 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 95
Appendix 6 – Surrey Exhibit 4 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $175 per gross sq.ft. of residential area
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $0 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $45,000 per underground/structured parking stall
Overall Costs Per Square Foot $245 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $245
Hard Cost Used in Analysis $245
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $30,121,875 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $30,121,875 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 96
Appendix 6 – Surrey Exhibit 4 Continued:
Analysis
Revenue
Strata Sales Revenue $60,243,750
Rental 1 Value $0
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $60,243,750
Less Commissions on Strata $1,807,313
Less Commissions on Rental $0
Less Commissions on Commercial $0
Net Sales Revenue/Value $58,436,438
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $223,562
Affordable Housing Contribution $134,000
Public Art Contribution (Allowance) $139,838
Undergrounding Utilities $195,750
Community Amenity Contribution Non-Residential $0
Rezoning Costs $500,000
Hard Construction Costs $27,517,500
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $2,499,387
Development management $957,118
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $1,660,553
Car Share $0
Marketing on Strata Units $1,807,313
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $473,020
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $0
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $160,800
TransLink - Townhouse $0
TransLink - Rental Residential $0
TransLink - Commercial $0
Market Strata Apartment DCCs $2,021,625
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $80,400
Less property tax allowance during approvals/development $177,945
Less School Tax Surcharge During Development $79,866
Interim financing on construction costs $1,299,136
Financing fees/costs $460,932
Less Net GST (assuming builder holds units) $0
Total Project Costs Before Land $41,432,646
Developer's Profit $7,855,785
Residual to Land and Land Carry $9,148,006
Less financing on land during construction and approvals $457,972
Less financing fee on land loan $58,658
Less property closing costs $335,490
Residual Land Value $8,295,886
Residual Value per sq.ft. of site $184
Residual Value per sq.ft. of FSR $74
Residual Value per sq.ft. of gross buildable floorspace $74
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 97
Appendix 6 – Surrey Exhibit 5:
Land Residual Estimate for Wood Frame Rental Development - No Rental Replacement
Assume 2.5 FAR (OCP Density)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 2.5 FAR
Bonus Density 0.0 FAR
Total Density 2.5 FAR
Total Gross floorspace 112,500 sq.ft.
Gross residential floorspace 112,500 sq.ft.
Gross commercial floorspace 0 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 0 85% 0 650 0 1.3 0 0%
Rental 1 112,500 85% 95,625 593 161 1.3 209 100%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 3.00 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 112,500 95,625 161 209 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $582 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.26 psf of gross building
Undergrounding Utilities $1.74 psf of gross building
Community Amenity Contribution Non-Residential $0.00 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 98
Appendix 6 – Surrey Exhibit 5 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0 per gross sq.ft. of residential area
Rental 1 Residential Area $165 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $0 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $45,000 per underground/structured parking stall
Overall Costs Per Square Foot $249 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $249
Hard Cost Used in Analysis $249
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.60% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $27,823,087 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $27,823,087 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 99
Appendix 6 – Surrey Exhibit 5 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $55,646,175
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $55,646,175
Less Commissions on Strata $0
Less Commissions on Rental $1,112,923
Less Commissions on Commercial $0
Net Sales Revenue/Value $54,533,251
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $268,608
Affordable Housing Contribution $0
Public Art Contribution (Allowance) $142,088
Undergrounding Utilities $195,750
Community Amenity Contribution Non-Residential $0
Rezoning Costs $500,000
Hard Construction Costs $27,967,500
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $2,530,267
Development management $968,943
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $1,680,853
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $483,000
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $568,330
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $193,200
TransLink - Commercial $0
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $2,021,625
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $96,600
Less property tax allowance during approvals/development $172,318
Less School Tax Surcharge During Development $72,969
Interim financing on construction costs $1,274,207
Financing fees/costs $452,027
Less Net GST (assuming builder holds units) $2,003,262
Total Project Costs Before Land $42,635,450
Developer's Profit $7,256,261
Residual to Land and Land Carry $4,641,540
Less financing on land during construction and approvals $232,367
Less financing fee on land loan $29,762
Less property closing costs $133,522
Residual Land Value $4,245,889
Residual Value per sq.ft. of site $94
Residual Value per sq.ft. of FSR $38
Residual Value per sq.ft. of gross buildable floorspace $38
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 100
Appendix 6 – Surrey Exhibit 5 Continued:
Rental 1
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 31 19% 450 1,300$
1-Bedroom 80 50% 550 1,450$
2-Bedroom 50 31% 750 1,700$
3-Bedroom 0 0% 0 -$
Total 161 100%
Average 593 1,499$
2.53$
Annual Revenue
Studios 483,600$
1-Bedroom 1,392,000$
2-Bedroom 1,020,000$
3-Bedroom -$
TOTAL 2,895,600$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $2.53 psf per month or
$1,499 per unit per month
Monthly Parking Revenue $75 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,250 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $55,462,500 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $181,020
Capitalization Rate for Rental Apartment Space 4.00%
Capitalized Value
Rental Revenue $2,895,600
Parking $188,100
Storage $38,640
Total $3,122,340
Vacancy $31,223
Net $3,091,117
Op Costs $684,250
Taxes $181,020
NOI $2,225,847
Capitalized Value $55,646,175
psf of rentable space $582
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 101
Appendix 6 – Surrey Exhibit 6:
Land Residual Estimate for Wood Frame Strata Development
Assume 2.5 FAR (OCP Density) - With Rental Replacement
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 2.5 FAR
Bonus Density 0.0 FAR
Total Density 2.5 FAR
Total Gross floorspace 112,500 sq.ft.
Gross residential floorspace 112,500 sq.ft.
Gross commercial floorspace 0 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 87,500 85% 74,375 715 104 1.3 135 72%
Rental 1 0 85% 0 585 0 1.3 0 0%
Rental 2 25,000 85% 21,250 532 40 1.3 52 28%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 3.00 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 112,500 95,625 144 187 100%
Revenue/Value
Strata Residential $630 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $306 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $116,293
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.26 psf of gross building
Undergrounding Utilities $1.74 psf of gross building *ask about non residential
Community Amenity Contribution Non-Residential $0.00 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 102
Appendix 6 – Surrey Exhibit 6 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $175 per gross sq.ft. of residential area
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $165 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $0 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $45,000 per underground/structured parking stall
Overall Costs Per Square Foot $248 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $248
Hard Cost Used in Analysis $248
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $26,679,776 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $26,679,776 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 103
Appendix 6 – Surrey Exhibit 6 Continued:
Analysis
Revenue
Strata Sales Revenue $46,856,250
Rental 1 Value $0
Rental 2 Value $6,503,302
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $53,359,552
Less Commissions on Strata $1,405,688
Less Commissions on Rental $130,066
Less Commissions on Commercial $0
Net Sales Revenue/Value $51,823,798
Project Costs
Upfront Compensation to Existing Tenants $116,293
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $240,246
Affordable Housing Contribution $104,000
Public Art Contribution (Allowance) $141,513
Undergrounding Utilities $195,750
Community Amenity Contribution Non-Residential $0
Rezoning Costs $500,000
Hard Construction Costs $27,852,500
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $2,526,872
Development management $967,643
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $1,678,621
Car Share $0
Marketing on Strata Units $1,405,688
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $80,000
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $367,120
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $141,200
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $124,800
TransLink - Townhouse $0
TransLink - Rental Residential $48,000
TransLink - Commercial $0
Market Strata Apartment DCCs $1,572,375
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $449,250
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $86,400
Less property tax allowance during approvals/development $169,520
Less School Tax Surcharge During Development $69,539
Interim financing on construction costs $1,306,321
Financing fees/costs $463,360
Less Net GST (assuming builder holds units) $325,165
Total Project Costs Before Land $41,976,079
Developer's Profit $6,958,086
Residual to Land and Land Carry $2,889,634
Less financing on land during construction and approvals $144,662
Less financing fee on land loan $18,529
Less property closing costs $55,006
Residual Land Value $2,671,437
Residual Value per sq.ft. of site $59
Residual Value per sq.ft. of FSR $24
Residual Value per sq.ft. of gross buildable floorspace $24
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 104
Appendix 6 – Surrey Exhibit 6 Continued:
Rental 2
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 10 25% 400 697$
1-Bedroom 18 45% 500 880$
2-Bedroom 12 30% 690 1,036$
3-Bedroom 0 0% 0 -$
Total 40 100%
Average 532 881$
1.66$
Annual Revenue
Studios 83,592$
1-Bedroom 190,123$
2-Bedroom 149,170$
3-Bedroom -$
TOTAL 422,885$
Rental 2 Revenue and Operating Cost Assumptions
Rental Rate Per Month $1.66 psf per month or
$881 per unit per month
Monthly Parking Revenue $50 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $3,800 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $6,481,250 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $21,154
Capitalization Rate for Rental Apartment Space 4.25%
Capitalized Value
Rental Revenue $422,885
Parking $31,200
Storage $12,480
Total $454,085
Vacancy $4,541
Net $449,544
Op Costs $152,000
Taxes $21,154
NOI $276,390
Capitalized Value $6,503,302
psf of rentable space $306.04
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 105
Appendix 6 – Surrey Exhibit 7:
Land Residual Estimate for Wood Frame Rental Development
Assume 2.5 FAR (OCP Density) - With Rental Replacement
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 2.5 FAR
Bonus Density 0.0 FAR
Total Density 2.5 FAR
Total Gross floorspace 112,500 sq.ft.
Gross residential floorspace 112,500 sq.ft.
Gross commercial floorspace 0 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 0 85% 0 650 0 1.3 0 0%
Rental 1 112,500 85% 95,625 593 161 1.3 209 80%
Rental 2 25,000 85% 21,250 532 40 1.3 52 20%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 3.00 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 137,500 116,875 201 261 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $605 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.27 psf of gross building
Undergrounding Utilities $1.74 psf of gross building
Community Amenity Contribution Non-Residential $0.00 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 106
Appendix 6 – Surrey Exhibit 7 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0 per gross sq.ft. of residential area
Rental 1 Residential Area $165 per gross sq.ft. of rental residential area
Rental 2 Residential Area $165 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $0 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $45,000 per underground/structured parking stall
Overall Costs Per Square Foot $250 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $250
Hard Cost Used in Analysis $250
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.60% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $28,920,980 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $28,920,980 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 107
Appendix 6 – Surrey Exhibit 7 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $57,841,960
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $57,841,960
Less Commissions on Strata $0
Less Commissions on Rental $1,156,839
Less Commissions on Commercial $0
Net Sales Revenue/Value $56,685,121
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $335,343
Affordable Housing Contribution $0
Public Art Contribution (Allowance) $143,110
Undergrounding Utilities $195,750
Community Amenity Contribution Non-Residential $0
Rezoning Costs $500,000
Hard Construction Costs $34,432,500
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $3,085,551
Development management $1,181,585
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $2,045,887
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $483,000
Initial Lease Up Costs on Rental 2 Units $80,000
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $709,530
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $241,200
TransLink - Commercial $0
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $2,021,625
Rental 2 Residential DCCs $449,250
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $120,600
Less property tax allowance during approvals/development $175,006
Less School Tax Surcharge During Development $76,263
Interim financing on construction costs $1,550,188
Financing fees/costs $549,791
Less Net GST (assuming builder holds units) $2,082,311
Total Project Costs Before Land $51,502,392
Developer's Profit $7,542,592
Residual to Land and Land Carry -$2,359,863
Less financing on land during construction and approvals -$118,141
Less financing fee on land loan -$15,132
Less property closing costs -$180,263
Residual Land Value -$2,046,328
Residual Value per sq.ft. of site -$45
Residual Value per sq.ft. of FSR -$18
Residual Value per sq.ft. of gross buildable floorspace -$18
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 108
Appendix 6 – Surrey Exhibit 7 Continued:
Rental 1
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 31 19% 450 1,350$
1-Bedroom 80 50% 550 1,500$
2-Bedroom 50 31% 750 1,750$
3-Bedroom 0 0% 0 -$
Total 161 100%
Average 593 1,549$
2.61$
Annual Revenue
Studios 502,200$
1-Bedroom 1,440,000$
2-Bedroom 1,050,000$
3-Bedroom -$
TOTAL 2,992,200$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $2.61 psf per month or
$1,549 per unit per month
Monthly Parking Revenue $75 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,250 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $57,853,125 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $188,822
Capitalization Rate for Rental Apartment Space 4.00%
Capitalized Value
Rental Revenue $2,992,200
Parking $188,100
Storage $38,640
Total $3,218,940
Vacancy $32,189
Net $3,186,751
Op Costs $684,250
Taxes $188,822
NOI $2,313,678
Capitalized Value $57,841,960
psf of rentable space $605
Rental 2
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 10 25% 400 697$
1-Bedroom 18 45% 500 880$
2-Bedroom 12 30% 690 1,036$
3-Bedroom 0 0% 0 -$
Total 40 100%
Average 532 881$
1.66$
Annual Revenue
Studios 83,592$
1-Bedroom 190,123$
2-Bedroom 149,170$
3-Bedroom -$
TOTAL 422,885$
Rental 2 Revenue and Operating Cost Assumptions
Rental Rate Per Month $1.66 psf per month or
$881 per unit per month
Monthly Parking Revenue $50 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $3,800 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $5,843,750 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $19,073
Capitalization Rate for Rental Apartment Space 4.25%
Capitalized Value
Rental Rev $422,885
Parking $31,200
Storage $800
Total $454,085
Vacancy $4,541
Net $449,544
Op Costs $152,000
Taxes $19,073
NOI $278,471
Capitalized Value $6,552,259
psf of rentable space $308.34
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 109
Appendix 6 – Surrey Exhibit 8:
Land Residual Estimate for Concrete Strata Mixed Use Development - No Rental Replacement
Assume 7.5 FAR (OCP Density)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 7.5 FAR
Bonus Density 0.0 FAR
Total Density 7.5 FAR
Total Gross floorspace 337,500 sq.ft.
Gross residential floorspace 324,000 sq.ft.
Gross commercial floorspace 13,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 324,000 85% 275,400 650 424 1.3 551 100%
Rental 1 0 85% 0 619 0 1.3 0 0%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 13,500 100% 13,500 n/a n/a 3.00 38 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 337,500 288,900 424 589 100%
Revenue/Value
Strata Residential $825 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $722 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.85 psf of gross building
Undergrounding Utilities $1.74 psf of gross building
Community Amenity Contribution Non-Residential $0.03 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 110
Appendix 6 – Surrey Exhibit 8 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $275 per gross sq.ft. of residential area
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $240 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $370 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $370
Hard Cost Used in Analysis $370
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 3.00 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $118,476,711 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $113,602,500 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 111
Appendix 6 – Surrey Exhibit 8 Continued:
Analysis
Revenue
Strata Sales Revenue $227,205,000
Rental 1 Value $0
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $9,748,421
Gross Office Value $0
Total Gross Value $236,953,421
Less Commissions on Strata $6,816,150
Less Commissions on Rental $0
Less Commissions on Commercial $194,968
Net Sales Revenue/Value $229,942,303
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $707,390
Affordable Housing Contribution $424,000
Public Art Contribution (Allowance) $625,925
Undergrounding Utilities $587,250
Community Amenity Contribution Non-Residential $1,426
Rezoning Costs $500,000
Hard Construction Costs $124,735,000
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $10,903,366
Development management $4,175,348
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $7,185,180
Car Share $0
Marketing on Strata Units $6,816,150
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $67,500
Tenant Improvement Allowance on Retail Space $337,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $1,496,720
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $0
GVS & DD Sewer Levy - Commercial $36,045
TransLink - Strata Apartment Residential $508,800
TransLink - Townhouse $0
TransLink - Rental Residential $0
TransLink - Commercial $16,875
Market Strata Apartment DCCs $5,822,280
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $161,730
Office DCCs $0
School Site Acquisition Charge $254,400
Less property tax allowance during approvals/development $877,584
Less School Tax Surcharge During Development $880,820
Interim financing on construction costs $9,409,746
Financing fees/costs $1,997,718
Less Net GST (assuming builder holds units) $0
Total Project Costs Before Land $179,572,656
Developer's Profit $30,898,726
Residual to Land and Land Carry $19,470,920
Less financing on land during construction and approvals $1,516,298
Less financing fee on land loan $121,194
Less property closing costs $772,588
Residual Land Value $17,060,841
Residual Value per sq.ft. of site $379
Residual Value per sq.ft. of FSR $51
Residual Value per sq.ft. of gross buildable floorspace $51
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 112
Appendix 6 – Surrey Exhibit 8 Continued:
Retail Assumptions
Lease Rate NNN $35.00 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $35,000
Parking $0
Total $35,000
Vacancy $700
NOI $34,300
Capitalized Value $722,105
Value psf of net leasable space $722 psf
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 113
Appendix 6 – Surrey Exhibit 9:
Land Residual Estimate for Concrete Rental Mixed Use Development - No Rental Replacement
Assume 7.5 FAR (OCP Density)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 7.5 FAR
Bonus Density 0.0 FAR
Total Density 7.5 FAR
Total Gross floorspace 337,500 sq.ft.
Gross residential floorspace 324,000 sq.ft.
Gross commercial floorspace 13,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 0 85% 0 650 0 1.3 0 0%
Rental 1 324,000 85% 275,400 591 466 1.3 606 100%
Rental 2 0 85% 0 565 0 0.6 0 0%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 13,500 100% 13,500 n/a n/a 3.00 38 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 337,500 288,900 466 644 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $607 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $722 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.85 psf of gross building
Undergrounding Utilities $1.74 psf of gross building
Community Amenity Contribution Non-Residential $0.03 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 114
Appendix 6 – Surrey Exhibit 9 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0 per gross sq.ft. of residential area
Rental 1 Residential Area $265 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $240 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $369 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $369
Hard Cost Used in Analysis $369
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 3.00 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.60% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $88,425,682 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $83,551,471 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 115
Appendix 6 - Surrey Exhibit 9 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $167,102,943
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $9,748,421
Gross Office Value $0
Total Gross Value $176,851,364
Less Commissions on Strata $0
Less Commissions on Rental $3,342,059
Less Commissions on Commercial $194,968
Net Sales Revenue/Value $173,314,336
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $777,462
Affordable Housing Contribution $0
Public Art Contribution (Allowance) $624,850
Undergrounding Utilities $587,250
Community Amenity Contribution Non-Residential $1,426
Rezoning Costs $500,000
Hard Construction Costs $124,520,000
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $10,854,916
Development management $4,156,794
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $7,153,330
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $1,398,000
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $67,500
Tenant Improvement Allowance on Retail Space $337,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $1,644,980
GVS & DD Sewer Levy - Commercial $36,045
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $559,200
TransLink - Commercial $16,875
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $5,822,280
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $161,730
Office DCCs $0
School Site Acquisition Charge $279,600
Less property tax allowance during approvals/development $681,422
Less School Tax Surcharge During Development $640,412
Interim financing on construction costs $9,068,910
Financing fees/costs $1,923,012
Less Net GST (assuming builder holds units) $6,015,706
Total Project Costs Before Land $178,873,102
Developer's Profit $23,061,418
Residual to Land and Land Carry -$28,620,183
Less financing on land during construction and approvals -$2,228,797
Less financing fee on land loan -$178,142
Less property closing costs -$1,319,629
Residual Land Value -$24,893,615
Residual Value per sq.ft. of site -$553
Residual Value per sq.ft. of FSR -$74
Residual Value per sq.ft. of gross buildable floorspace -$74
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 116
Appendix 6 – Surrey Exhibit 9 Continued:
Retail Assumptions
Lease Rate NNN $35.00 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $35,000
Parking $0
Total $35,000
Vacancy $700
NOI $34,300
Capitalized Value $722,105
Value psf of net leasable space $722 psf
Rental 1
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 91 20% 450 1,350$
1-Bedroom 235 50% 550 1,500$
2-Bedroom 140 30% 750 1,750$
3-Bedroom 0 0% 0 -$
Total 466 100%
Average 591 1,546$
2.62$
Annual Revenue
Studios 1,474,200$
1-Bedroom 4,230,000$
2-Bedroom 2,940,000$
3-Bedroom -$
TOTAL 8,644,200$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $2.62 psf per month or
$1,546 per unit per month
Monthly Parking Revenue $75 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,250 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $166,617,000 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $543,808
Capitalization Rate for Rental Apartment Space 4.00%
Capitalized Value
Rental Revenue $8,644,200
Parking $545,400
Storage $111,840
Total $9,301,440
Vacancy $93,014
Net $9,208,426
Op Costs $1,980,500
Taxes $543,808
NOI $6,684,118
Capitalized Value $167,102,943
psf of rentable space $607
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 117
Appendix 6 - Surrey Exhibit 10:
Land Residual Estimate for Concrete Strata Mixed Use Development
Assume 7.5 FAR (OCP Density) - With Rental Replacement
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 7.5 FAR
Bonus Density 0.0 FAR
Total Density 7.5 FAR
Total Gross floorspace 337,500 sq.ft.
Gross residential floorspace 324,000 sq.ft.
Gross commercial floorspace 13,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 299,000 85% 254,150 715 355 1.3 462 90%
Rental 1 0 85% 0 585 0 1.3 0 0%
Rental 2 25,000 85% 21,250 532 40 1.3 52 10%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 13,500 100% 13,500 n/a n/a 3.00 38 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 337,500 288,900 395 552 100%
Revenue/Value
Strata Residential $840 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $306 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $116,293
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.82 psf of gross building
Undergrounding Utilities $1.74 psf of gross building
Community Amenity Contribution Non-Residential $0.03 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 118
Appendix 6 – Surrey Exhibit 10 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $275 per gross sq.ft. of residential area
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $265 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $240 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $363 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $363
Hard Cost Used in Analysis $363
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 3.00 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 5.00% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $109,994,651 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $109,994,651 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 119
Appendix 6 – Surrey Exhibit 10 Continued:
Analysis
Revenue
Strata Sales Revenue $213,486,000
Rental 1 Value $0
Rental 2 Value $6,503,302
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $219,989,302
Less Commissions on Strata $6,404,580
Less Commissions on Rental $130,066
Less Commissions on Commercial $0
Net Sales Revenue/Value $213,454,656
Project Costs
Upfront Compensation to Existing Tenants $116,293
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $659,007
Affordable Housing Contribution $355,000
Public Art Contribution (Allowance) $614,500
Undergrounding Utilities $587,250
Community Amenity Contribution Non-Residential $1,426
Rezoning Costs $500,000
Hard Construction Costs $122,450,000
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $10,698,192
Development management $4,096,778
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $7,050,303
Car Share $0
Marketing on Strata Units $6,404,580
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $80,000
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $67,500
Tenant Improvement Allowance on Retail Space $337,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $1,253,150
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $141,200
GVS & DD Sewer Levy - Commercial $36,045
TransLink - Strata Apartment Residential $426,000
TransLink - Townhouse $0
TransLink - Rental Residential $48,000
TransLink - Commercial $16,875
Market Strata Apartment DCCs $5,373,030
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $449,250
Rental 3 Residential DCCs $0
Retail DCCs $161,730
Office DCCs $0
School Site Acquisition Charge $237,000
Less property tax allowance during approvals/development $822,217
Less School Tax Surcharge During Development $851,957
Interim financing on construction costs $9,226,504
Financing fees/costs $1,958,683
Less Net GST (assuming builder holds units) $325,165
Total Project Costs Before Land $176,389,039
Developer's Profit $28,686,605
Residual to Land and Land Carry $8,379,012
Less financing on land during construction and approvals $652,516
Less financing fee on land loan $52,154
Less property closing costs $290,031
Residual Land Value $7,384,311
Residual Value per sq.ft. of site $164
Residual Value per sq.ft. of FSR $22
Residual Value per sq.ft. of gross buildable floorspace $22
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 120
Appendix 6 – Surrey Exhibit 10 Continued:
Rental 2
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 10 25% 400 697$
1-Bedroom 18 45% 500 880$
2-Bedroom 12 30% 690 1,036$
3-Bedroom 0 0% 0 -$
Total 40 100%
Average 532 881$
1.66$
Annual Revenue
Studios 83,592$
1-Bedroom 190,123$
2-Bedroom 149,170$
3-Bedroom -$
TOTAL 422,885$
Rental 2 Revenue and Operating Cost Assumptions
Rental Rate Per Month $1.66 psf per month or
$881 per unit per month
Monthly Parking Revenue $50 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $3,800 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $6,481,250 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $21,154
Capitalization Rate for Rental Apartment Space 4.25%
Capitalized Value
Rental Revenue $422,885
Parking $31,200
Storage $12,480
Total $454,085
Vacancy $4,541
Net $449,544
Op Costs $152,000
Taxes $21,154
NOI $276,390
Capitalized Value $6,503,302
psf of rentable space $306.04
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 121
Appendix 6 – Surrey Exhibit 11:
Land Residual Estimate for Concrete Mixed Rental Development
Assume 7.5 FAR (OCP Density) - With Rental Replacement
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 45,000 sq.ft. 1.03 acre
Dedications 0 sq.ft.
Site Size 45,000 sq.ft. or
Site Frontage 160 ft
Base Density 7.5 FAR
Bonus Density 0.0 FAR
Total Density 7.5 FAR
Total Gross floorspace 337,500 sq.ft.
Gross residential floorspace 324,000 sq.ft.
Gross commercial floorspace 13,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 1075
sf
Parking
Stalls Share of Units
Strata Residential 0 85% 0 650 0 1.3 0 0%
Rental 1 324,000 85% 275,400 593 465 1.3 605 92%
Rental 2 25,000 85% 21,250 532 40 1.3 52 8%
Rental 3 0 85% 0 565 0 0.5 0 0%
Retail 0 100% 0 n/a n/a 3.00 0 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 349,000 296,650 505 657 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $607 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $0 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $204,436
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902 $5,000 per lineal metre of frontage
Community Amenity Contribution Residential $1,668 per unit on average
Affordable Housing Contribution $1,000 per strata unit
Public Art Contribution (Allowance) $1.85 psf of gross building
Undergrounding Utilities $1.74 psf of gross building
Community Amenity Contribution Non-Residential $0.03 psf of site area
Rezoning Costs $500,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 122
Appendix 6 – Surrey Exhibit 11 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0 per gross sq.ft. of residential area
Rental 1 Residential Area $265 per gross sq.ft. of rental residential area
Rental 2 Residential Area $265 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $240 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $369 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $369
Hard Cost Used in Analysis $369
Site Landscaping $450,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $17.97 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 2 Residential DCCs $17.97 per sq.ft. of floorspace
Rental 3 Residential DCCs $17.97 per sq.ft. of floorspace
Retail DCCs $11.98 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 3.00 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $3,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $1,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.60% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.326% of assessed value
Assumed current assessment (Year 1 of analysis) $21,286,121
Assumed assessment after 1 year of construction (Year 2 of analysis) $83,564,109 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $83,564,109 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 123
Appendix 6 – Surrey Exhibit 11 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $167,128,219
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $0
Gross Office Value $0
Total Gross Value $167,128,219
Less Commissions on Strata $0
Less Commissions on Rental $3,342,564
Less Commissions on Commercial $0
Net Sales Revenue/Value $163,785,654
Project Costs
Upfront Compensation to Existing Tenants $204,436
Tenant Relocation $0
Allowance for Demolition of Existing Buildings $350,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $243,902
Electrical Charging Station $0
Community Amenity Contribution Residential $842,528
Affordable Housing Contribution $0
Public Art Contribution (Allowance) $624,159
Undergrounding Utilities $587,250
Community Amenity Contribution Non-Residential $1,426
Rezoning Costs $500,000
Hard Construction Costs $128,620,000
Site Landscaping $450,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $11,208,888
Development management $4,292,345
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $7,386,025
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $1,395,000
Initial Lease Up Costs on Rental 2 Units $80,000
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $0
Tenant Improvement Allowance on Retail Space $0
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $1,782,650
GVS & DD Sewer Levy - Commercial $0
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $606,000
TransLink - Commercial $16,875
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $5,822,280
Rental 2 Residential DCCs $449,250
Rental 3 Residential DCCs $0
Retail DCCs $0
Office DCCs $0
School Site Acquisition Charge $303,000
Less property tax allowance during approvals/development $649,688
Less School Tax Surcharge During Development $640,513
Interim financing on construction costs $9,360,883
Financing fees/costs $1,984,692
Less Net GST (assuming builder holds units) $6,016,616
Total Project Costs Before Land $184,418,406
Developer's Profit $21,793,520
Residual to Land and Land Carry -$42,426,272
Less financing on land during construction and approvals -$3,303,946
Less financing fee on land loan -$264,076
Less property closing costs -$1,920,267
Residual Land Value -$36,937,983
Residual Value per sq.ft. of site -$821
Residual Value per sq.ft. of FSR -$109
Residual Value per sq.ft. of gross buildable floorspace -$109
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 124
Appendix 6 – Surrey Exhibit 11 Continued:
Rental 1
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 31 19% 450 1,350$
1-Bedroom 80 50% 550 1,500$
2-Bedroom 50 31% 750 1,750$
3-Bedroom 0 0% 0 -$
Total 161 100%
Average 593 1,549$
2.61$
Annual Revenue
Studios 502,200$
1-Bedroom 1,440,000$
2-Bedroom 1,050,000$
3-Bedroom -$
TOTAL 2,992,200$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $2.61 psf per month or
$1,549 per unit per month
Monthly Parking Revenue $75 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,250 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $166,617,000 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $543,808
Capitalization Rate for Rental Apartment Space 4.00%
Capitalized Value
Rental Revenue $8,642,068
Parking $544,500
Storage $111,600
Total $9,298,168
Vacancy $92,982
Net $9,205,187
Op Costs $1,976,250
Taxes $543,808
NOI $6,685,129
Capitalized Value $167,128,219
psf of rentable space $607
Rental 2
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 10 25% 400 697$
1-Bedroom 18 45% 500 880$
2-Bedroom 12 30% 690 1,036$
3-Bedroom 0 0% 0 -$
Total 40 100%
Average 532 881$
1.66$
Annual Revenue
Studios 83,592$
1-Bedroom 190,123$
2-Bedroom 149,170$
3-Bedroom -$
TOTAL 422,885$
Rental 2 Revenue and Operating Cost Assumptions
Rental Rate Per Month $1.66 psf per month or
$881 per unit per month
Monthly Parking Revenue $50 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $3,800 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $5,843,750 (see capitalized value below)
Residential Tax Rate 0.326%
Residential Property Taxes $19,073
Capitalization Rate for Rental Apartment Space 4.25%
Capitalized Value
Rental Rev $422,885
Parking $31,200
Storage $800
Total $454,085
Vacancy $4,541
Net $449,544
Op Costs $152,000
Taxes $19,073
NOI $278,471
Capitalized Value $6,552,259
psf of rentable space $308.34
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 125
Appendix 7 – Maple Ridge Exhibit 1:
Estimated Income Value Assuming Property is Improved with Old Low Density Commercial Buildings
Major Assumptions Site and Building Size Existing Zoning C-3 Site Size 15,000 sq.ft. or 115 by 130
Assumed Density 0.30 FSR Total Commercial Space 4,500 sq.ft. Retail 4,500 sq.ft. 100% rentable
Revenue and Value Average Lease Rate for Retail Space $18.00 per sq.ft. net, base building Capitalization Rate 4.75%
Value of Retail and Service Space Upon Lease-up $379 per sq.ft. of leasable area
Vacancy and non recoverables 0%
Estimated Overall Value Capitalized Value of Retail/Service Space $1,705,263 Total Value of Commercial $1,705,263
Appendix 7 – Maple Ridge Exhibit 2:
Estimated Income Value of Property if Improved with an Older Low Density Rental Building
Rental Apartment Value
Site Size (SF) 15,000
Assumed FSR 0.5
Total Floor Area (SF) 7,500
Average Gross Unit Size (SF) 900
Number of Units 9.0
Market Value Per Unit1 $150,000
Value of Rental $1,350,000
1Based on recent market transactions.
Appendix 7 – Maple Ridge Exhibit 3:
Estimated Existing Value of Site if Improved with Older Single Family Houses
Single Family Assembly Value
Site Size (SF) 15,000
Value Per SF of Site $90
Total Value $1,350,000
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 126
Appendix 7 – Maple Ridge Exhibit 4:
Land Residual Estimate for Strata Mixed Use Development
Assume 2.3 FSR (C-3 Zone)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 15,000 sq.ft. 0.34 acre
Dedications 0 sq.ft.
Site Size 15,000 sq.ft. or
Site Frontage 115 ft
Base Density 2.3 FSR
Bonus Density 0.0 FSR
Total Density 2.3 FSR
Total Gross floorspace 34,500 sq.ft.
Gross residential floorspace 30,000 sq.ft.
Gross commercial floorspace 4,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 100
sq. m.
Parking
Stalls Share of Units
Strata Residential 30,000 85% 25,500 850 30 1.0 30 100%
Rental 1 0 85% 0 631 0 1.0 0 0%
Rental 2 0 85% 0 565 0 0.0 0 0%
Rental 3 0 85% 0 565 0 0.0 0 0%
Retail 4,500 100% 4,500 n/a n/a 1.0 4 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 34,500 30,000 30 34 100%
Revenue/Value
Strata Residential $540 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $567 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings (Allowance) $100,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $122,713 $3,500 per lineal metre of frontage
Density Bonus Contribution $0 psf of bonus density
Rezoning Costs $0
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 127
Appendix 7 – Maple Ridge Exhibit 4 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $180
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $240 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $45,000 per underground/structured parking stall
Overall Costs Per Square Foot $232 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $232
Hard Cost Used in Analysis $232
Site Landscaping $150,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $10.09 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $10.09 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $4.21 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $2,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $2,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.20% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.463% of assessed value
Assumed current assessment (Year 1 of analysis) $1,580,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $8,161,579 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $6,885,000 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 128
Appendix 7 – Exhibit 4 Continued:
Analysis
Revenue
Strata Sales Revenue $13,770,000
Rental 1 Value $0
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $2,553,158
Gross Office Value $0
Total Gross Value $16,323,158
Less Commissions on Strata $413,100
Less Commissions on Rental $0
Less Commissions on Commercial $51,063
Net Sales Revenue/Value $15,858,995
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings (Allowance) $100,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $122,713
Electrical Charging Station $0
Density Bonus Contribution $0
Rezoning Costs $0
Hard Construction Costs $8,010,000
Site Landscaping $150,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $704,031
Development management $269,602
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $467,817
Car Share $0
Marketing on Strata Units $413,100
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $22,500
Tenant Improvement Allowance on Retail Space $112,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $105,900
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $0
GVS & DD Sewer Levy - Commercial $12,015
TransLink - Strata Apartment Residential $36,000
TransLink - Townhouse $0
TransLink - Rental Residential $0
TransLink - Commercial $5,625
Market Strata Apartment DCCs $302,706
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $18,959
Office DCCs $0
School Site Acquisition Charge $18,000
Less property tax allowance during approvals/development $39,313
Less School Tax Surcharge During Development $10,155
Interim financing on construction costs $358,010
Financing fees/costs $126,888
Less Net GST (assuming builder holds units) $0
Total Project Costs Before Land $11,405,835
Developer's Profit $2,128,540
Residual to Land and Land Carry $2,324,620
Less financing on land during construction and approvals $116,376
Less financing fee on land loan $14,906
Less property closing costs $29,684
Residual Land Value $2,163,654
Residual Value per sq.ft. of site $144
Residual Value per sq.ft. of FSR $63
Residual Value per sq.ft. of gross buildable floorspace $63
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 129
Appendix 7 – Exhibit 4 Continued:
Retail Assumptions
Lease Rate NNN $27.50 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $27,500
Parking $0
Total $27,500
Vacancy $550
NOI $26,950
Capitalized Value $567,368
Value psf of net leasable space $567.37 psf
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 130
Appendix 7 – Exhibit 5:
Land Residual Estimate for Rental Mixed Use Development
Assume 2.3 FSR (C-3 Zone)
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 15,000 sq.ft. 0.34 acre
Dedications 0 sq.ft.
Site Size 15,000 sq.ft. or
Site Frontage 115 ft
Base Density 2.3 FSR
Bonus Density 0.0 FSR
Total Density 2.3 FSR
Total Gross floorspace 34,500 sq.ft.
Gross residential floorspace 30,000 sq.ft.
Gross commercial floorspace 4,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 100
sq. m.
Parking
Stalls Share of Units
Strata Residential 0 85% 0 850 0 1.0 0 0%
Rental 1 30,000 85% 25,500 643 40 1.0 40 100%
Rental 2 0 85% 0 565 0 0.0 0 0%
Rental 3 0 85% 0 565 0 0.0 0 0%
Retail 4,500 100% 4,500 n/a n/a 1.0 4 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 34,500 30,000 40 44 100%
Revenue/Value
Strata Residential $0 per net square foot
Rental 1 $456 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $567 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings (Allowance) $100,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $122,713 $3,500 per lineal metre of frontage
Density Bonus Contribution $0 psf of bonus density
Rezoning Costs $0
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 131
Appendix 7 – Exhibit 5 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $0
Rental 1 Residential Area $170 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $240 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $45,000 per underground/structured parking stall
Overall Costs Per Square Foot $237 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $237
Hard Cost Used in Analysis $237
Site Landscaping $150,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $10.09 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $10.09 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $4.21 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 1.75 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $2,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $2,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.20% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.463% of assessed value
Assumed current assessment (Year 1 of analysis) $1,580,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $7,092,744 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $5,816,165 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 132
Appendix 7 – Exhibit 5 Continued:
Analysis
Revenue
Strata Sales Revenue $0
Rental 1 Value $11,632,329
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $2,553,158
Gross Office Value $0
Total Gross Value $14,185,487
Less Commissions on Strata $0
Less Commissions on Rental $232,647
Less Commissions on Commercial $51,063
Net Sales Revenue/Value $13,901,777
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings (Allowance) $100,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $122,713
Electrical Charging Station $0
Density Bonus Contribution $0
Rezoning Costs $0
Hard Construction Costs $8,160,000
Site Landscaping $150,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $716,781
Development management $274,485
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $476,199
Car Share $0
Marketing on Strata Units $0
Initial Lease Up Costs on Rental 1 Units $80,000
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $22,500
Tenant Improvement Allowance on Retail Space $112,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $0
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $141,200
GVS & DD Sewer Levy - Commercial $12,015
TransLink - Strata Apartment Residential $0
TransLink - Townhouse $0
TransLink - Rental Residential $48,000
TransLink - Commercial $5,625
Market Strata Apartment DCCs $0
Market Townhouse DCCs $0
Rental 1 Residential DCCs $302,706
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $18,959
Office DCCs $0
School Site Acquisition Charge $24,000
Less property tax allowance during approvals/development $35,602
Less School Tax Surcharge During Development $6,948
Interim financing on construction costs $354,483
Financing fees/costs $125,603
Less Net GST (assuming builder holds units) $372,235
Total Project Costs Before Land $11,662,554
Developer's Profit $1,849,788
Residual to Land and Land Carry $389,436
Less financing on land during construction and approvals $19,496
Less financing fee on land loan $2,497
Less property closing costs -$57,046
Residual Land Value $424,490
Residual Value per sq.ft. of site $28
Residual Value per sq.ft. of FSR $12
Residual Value per sq.ft. of gross buildable floorspace $12
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 133
Appendix 7 – Exhibit 5 Continued:
Retail Assumptions
Lease Rate NNN $27.50 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $27,500
Parking $0
Total $27,500
Vacancy $550
NOI $26,950
Capitalized Value $567,368
Value psf of net leasable space $567.37 psf
Rental Assumptions
Rental 1
Assumptions Market Rent
Unit Type # Units Size rent/month
Studios 0 0% 475 -$
1-Bedroom 28 70% 575 1,350$
2-Bedroom 12 30% 800 1,650$
3-Bedroom 0 0% 0 -$
Total 40 100%
Average 643 1,440$
2.24$
Annual Revenue
Studios -$
1-Bedroom 453,600$
2-Bedroom 237,600$
3-Bedroom -$
TOTAL 691,200$
Rental 1 Revenue and Operating Cost Assumptions
Rental Rate Per Month $2.24 psf per month or
$1,440 per unit per month
Monthly Parking Revenue $50 per month
Monthly Storage Revenue $40 per month on 50% of units
Vacancy and Non Recoverable Allowance 1.00%
Operating costs for New Rental Units $4,600 per unit per year
Property Tax Allowance
Residential Assessment (upon completion of new building) $11,602,500 (see capitalized value below)
Residential Tax Rate 0.463%
Residential Property Taxes $53,718
Capitalization Rate for Rental Apartment Space 4.125%
Capitalized Value
Rental Revenue $691,200
Parking $24,000
Storage $9,600
Total $724,800
Vacancy $7,248
Net $717,552
Op Costs $184,000
Taxes $53,718
NOI $479,834
Capitalized Value $11,632,329
psf of rentable space $456.17
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 134
Appendix 7 – Exhibit 6:
Land Residual Estimate for Strata Mixed Use Development A CAC would be required for a rezoning to 4.0 FSR.
Assume 4.0 FSR (No CAC) A CAC has been excluded because project is not viable even without it.
Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)
Site and Building Size
Gross Parcel Size 15,000 sq.ft. 0.34 acre
Dedications 0 sq.ft.
Site Size 15,000 sq.ft. or
Site Frontage 115 ft
Base Density 4.0 FSR
Bonus Density 0.0 FSR
Total Density 4.0 FSR
Total Gross floorspace 60,000 sq.ft.
Gross residential floorspace 55,500 sq.ft.
Gross commercial floorspace 4,500 sq.ft.
Concept Gross SF Efficiency
Net Saleable
or Rentable
Avg Unit
Size
Number of
Units
Parking
Stalls per
Unit or 100
sq. m.
Parking
Stalls Share of Units
Strata Residential 55,500 85% 47,175 850 56 1.0 56 100%
Rental 1 0 85% 0 631 0 1.0 0 0%
Rental 2 0 85% 0 565 0 0.0 0 0%
Rental 3 0 85% 0 565 0 0.0 0 0%
Retail 4,500 100% 4,500 n/a n/a 1.0 4 n/a
Office 0 95% 0 n/a n/a 0.0 0 n/a
Total 60,000 51,675 56 60 100%
Revenue/Value
Strata Residential $640 per net square foot
Rental 1 $0 per net square foot (see separate calculations)
Rental 2 $0 per net square foot (see separate calculations)
Rental 3 $0 per net square foot (see separate calculations)
Retail $567 per net square foot including parking revenue (see separate calculations)
Office $0 per net square foot including parking revenue (see separate calculations)
Pre Construction Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings (Allowance) $100,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $122,713 $3,500 per lineal metre of frontage
Density Bonus Contribution $0 psf of bonus density
Rezoning Costs $0
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 135
Appendix 7 - Exhibit 6 Continued:
Construction Costs
Hard Construction Costs
Market Strata Residential Area $300
Rental 1 Residential Area $0 per gross sq.ft. of rental residential area
Rental 2 Residential Area $0 per gross sq.ft. of rental residential area
Rental 3 Residential Area $0 per gross sq.ft. of rental residential area
Retail Area (shell space - no TI) $250 per gross sq.ft. of retail area
Office Area (shell space - no TI) $0 per gross sq.ft. of commercial area
Cost Per Garage/Underground Parking Stall $55,000 per underground/structured parking stall
Overall Costs Per Square Foot $351 per gross sq.ft.
Sustainability Premium 0%
Total Estimated Cost per Square Foot $351
Hard Cost Used in Analysis $351
Site Landscaping $150,000 or $20 psf of site area on 50% of site
Electrical Charging Station $0 - stations $0 per station
Other $0
Soft costs and Professional Fees 8.5% of hard costs, landscaping and site prep/servicing costs
Development management 3.0% of hard costs, landscaping and site prep/servicing costs and soft costs
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs 5.0% of hard, soft and management costs
Car Share $0
Government Levies
GVS & DD Sewer Levy - Strata Apartment $3,530 per apartment unit
GVS & DD Sewer Levy - Townhouse $0 per townhouse unit
GVS & DD Sewer Levy - Rental Residential $3,530 per unit
GVS & DD Sewer Levy - Commercial $2.67 per sq.ft. of commercial space
TransLink - Strata Apartment Residential $1,200 per market unit
TransLink - Townhouse $0 per market unit
TransLink - Rental Residential $1,200 per unit
TransLink - Commercial $1.25 per sq.ft. of commercial space
Market Strata Apartment DCCs $10.09 per sq.ft. of floorspace
Market Townhouse DCCs $0.00 per sq.ft. of floorspace
Rental 1 Residential DCCs $10.09 per sq.ft. of floorspace
Rental 2 Residential DCCs $0.00 per sq.ft. of floorspace
Rental 3 Residential DCCs $0.00 per sq.ft. of floorspace
Retail DCCs $4.21 per sq.ft. of floorspace
Office DCCs $0.00 per sq.ft. of floorspace
School Site Acquisition Charge $600 per unit
Financing
Interim financing 5.0% assuming a 2.50 year construction period
Financing charged on 50% of land and 75% of construction costs
Financing fees 1.5%
Commissions and Marketing
Commissions on Strata Residential 3.0% of gross strata market residential revenue
Marketing on Strata Residential 3.0% of gross strata market residential revenue
Commissions on Sale of Commercial 2.0% of gross commercial value
Commission on Sale of Rental Units 2.0% of value
Initial Lease Up Costs on Rental 1 Units $2,000 per unit
Initial Lease Up Costs on Rental 2 Units $2,000 per unit
Initial Lease Up Costs on Rental 3 Units $2,000 per unit
Leasing Commissions on Commercial Space $5.00 per sq.ft.
Tenant Improvement Allowance on Retail Space $25.00 per sq.ft.
Tenant Improvement Allowance on Office Space $50.00 per sq.ft.
Other Costs and Allowances
Net GST on Market and Below Market Rental Units 3.20% of capitalized value of rental units
Net GST on Social Housing Units 2.50% of development cost of new units (assumes rebate)
Property Taxes 0.463% of assessed value
Assumed current assessment (Year 1 of analysis) $1,580,000
Assumed assessment after 1 year of construction (Year 2 of analysis) $16,372,579 (50% of completed project value)
Developer's Profit 15.0% of total costs or 13.0% of gross market revenue/value
School Tax Surcharge During Development*
Tax Rate 0.2% between $3.0-$4.0 million, and0.4% over $4.0 million
Residential Portion of current assessment (Year 1 of analysis) $0
Assumed residential portion of assessment after 1 year of construction $15,096,000 (50% of completed residential project value)
*Assumes BC Owner
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 136
Appendix 7 - Exhibit 6 Continued:
Analysis
Revenue
Strata Sales Revenue $30,192,000
Rental 1 Value $0
Rental 2 Value $0
Rental 3 Value $0
Gross Retail Value $2,553,158
Gross Office Value $0
Total Gross Value $32,745,158
Less Commissions on Strata $905,760
Less Commissions on Rental $0
Less Commissions on Commercial $51,063
Net Sales Revenue/Value $31,788,335
Project Costs
Upfront Compensation to Existing Tenants $0
Tenant Relocation $0
Allowance for Demolition of Existing Buildings (Allowance) $100,000
Allowance for Remediation $0
Site Preparation/Fill $0
Standard Site Servicing $122,713
Electrical Charging Station $0
Density Bonus Contribution $0
Rezoning Costs $0
Hard Construction Costs $21,075,000
Site Landscaping $150,000
Electrical Charging Station $0
Other $0
Soft costs and Professional Fees $1,814,556
Development management $694,868
Fees, legal and survey for rental portion $0
Contingency on hard and soft costs $1,197,857
Car Share $0
Marketing on Strata Units $905,760
Initial Lease Up Costs on Rental 1 Units $0
Initial Lease Up Costs on Rental 2 Units $0
Initial Lease Up Costs on Rental 3 Units $0
Leasing Commissions on Commercial Space $22,500
Tenant Improvement Allowance on Retail Space $112,500
Tenant Improvement Allowance on Office Space $0
GVS & DD Sewer Levy - Strata Apartment $197,680
GVS & DD Sewer Levy - Townhouse $0
GVS & DD Sewer Levy - Rental Residential $0
GVS & DD Sewer Levy - Commercial $12,015
TransLink - Strata Apartment Residential $67,200
TransLink - Townhouse $0
TransLink - Rental Residential $0
TransLink - Commercial $5,625
Market Strata Apartment DCCs $560,006
Market Townhouse DCCs $0
Rental 1 Residential DCCs $0
Rental 2 Residential DCCs $0
Rental 3 Residential DCCs $0
Retail DCCs $18,959
Office DCCs $0
School Site Acquisition Charge $33,600
Less property tax allowance during approvals/development $124,678
Less School Tax Surcharge During Development $69,576
Interim financing on construction costs $1,275,727
Financing fees/costs $321,309
Less Net GST (assuming builder holds units) $0
Total Project Costs Before Land $28,882,130
Developer's Profit $4,269,969
Residual to Land and Land Carry -$1,363,763
Less financing on land during construction and approvals -$91,031
Less financing fee on land loan -$8,591
Less property closing costs -$134,547
Residual Land Value -$1,129,595
Residual Value per sq.ft. of site -$75
Residual Value per sq.ft. of FSR -$19
Residual Value per sq.ft. of gross buildable floorspace -$19
REDUCING THE BARRIER OF HIGH LAND COST: STRATEGIES FOR FACILITATING MORE AFFORDABLE RENTAL HOUSING CONSTRUCTION IN METRO VANCOUVER
PAGE 137
Appendix 7 - Exhibit 6 Continued:
Retail Assumptions
Lease Rate NNN $27.50 psf per year
Monthly Parking Revenue (net of costs) $0 per month
Vacancy and Non Recoverable Allowance 2.00%
Capitalization Rate 4.75%
Capitalized Value per 1000 SF Gross
Rental Rev $27,500
Parking $0
Total $27,500
Vacancy $550
NOI $26,950
Capitalized Value $567,368
Value psf of net leasable space $567.37 psf